Citibank is worried about weak iPhone XR sales

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iphone xr
The iPhone XR may not be the sales juggernaut some predicted.
Photo: Apple

Financial services group Citibank has concerns about iPhone XR demand — and it’s worried that this will affect chip stocks.

In a new note to clients, Citi analyst Atif Malik downgraded Skyworks Solutions stock. Skyworks manufactures radio frequency semiconductors, which let smartphones talk to wireless networks. Apple orders allegedly make up 35 to 40 percent of Skyworks’ annual revenue.

“We are downgrading Skyworks Solutions to neutral from buy post the earnings season based on broad smartphone weakness observation in China and disappointing iPhone XR unit sales, which will likely hinder radio frequency semis growth in 2019,” Malik wrote.

Malik cut his price target for the company from $116 to $85, representing a decrease of 10.8 percent.

Weak iPhone XR demand?

It’s not clear exactly where Malik is getting his suggestions that iPhone XR demand has been weak. He’s not the only analyst to suggest such a thing, however.Last week, Rosenblatt Securities’ analyst Jun Zhang claimed that iPhone XR sell-through rate, “continues to be weaker than we initially expected.” According to other reports, Foxconn is using just 45 production lines to manufacture the iPhone XR, despite preparing 60.

That’s bad news at face value. However, it’s worth noting that it’s also exactly the same thing was claimed about last year’s iPhone X, which wound up doing significantly better than analysts predicted. This year, with three models of iPhone available, it’s even harder to build up an accurate picture of what kind of demand exists for these devices.

As for weakening Chinese smartphone sales, it seems that Apple is actually rebounding in that market. During this weekend’s Singles Day, a Chinese holiday in which single people buy themselves gifts, the iPhone supposedly outsold its Chinese smartphone rivals on one of China’s biggest e-commerce websites.

Source: CNBC