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Why Is Apple (AAPL) Stock Falling Today?

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Shares of Apple (AAPL - Free Report) were down more than 4% in early morning trading Monday, adding to the iPhone maker’s post-earnings selloff and underscoring fears about the performance of its key business segment.

Some of Apple’s sluggishness today can be pegged on a report from Nikkei Asian Review that suggested the tech behemoth has narrowed its sales expectations for the new iPhone XR. Specifically, Nikkei said that Apple has told two of its suppliers, Foxconn and Pegatron, to stop adding production lines for the low-cost model.

The report indicated that Foxxconn is running at about 75% capacity on explicit orders from Apple, translating to about 100,000 fewer phones per day. The same sentiment has been expressed to Pegatron, Nikkei said.

However, the publication did say that Apple is upping its quarterly production goal for older models—such as the 8 and 8 Plus—to 25 million units from 20 million units. The iPhone 8 line currently sells for about 20% less than the XR, according to the report.

As total iPhone sales plateau, investors have circled the average selling price of the marquee device as a key area for growth from Apple. The higher price tag of the iPhone X line delivers that growth, and to see shoppers opting for outdated models that are multiple steps down in terms of price is likely a point of concern for Wall Street.

This news punctuated Apple’s second analyst downgrade since its earnings announcement last week. The most recent downgrade comes from Rosenblatt Securities, which lowered its rating on Apple shares to neutral from buy and warned that it would be challenging for the company to offset weaker iPhone sales volume with higher prices in the second half of 2019.

“Calendar fourth-quarter guidance reflects our cautious view on weaker than expected sell-through and production reductions for iPhone XS/XR,” wrote Rosenblatt’s Jun Zhang in a note Friday.

Apple topped expectations in its most recent quarterly earnings report, but the company guided on the soft end for the holiday quarter, sending the stock sharply lower on Friday. Management also announced that it would no longer release unit sales for specific products like the iPhone, adding to concerns that growth in the core business is getting harder to find.

Consensus estimates have Apple’s current quarter earnings per share and revenue sitting at $4.77 and $91.32 billion, respectively. These results would represent year-over-year growth rates of 23% and 3%.

Apple has witnessed two negative revisions and one positive revision to its EPS estimates for this period within the past week. These adjustments have pushed the consensus two cents lower in that time. Nevertheless, a more positive estimate trend for future periods has kept the stock at a Zacks Rank #2 (Buy). Apple is also trading at a reasonably attractive 15.4x forward earnings after recent selling.

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