Apple may have a big problem on its hands

Yes, Jimmy Fallon, that really was Tim Cook.

The Tonight Show host was recently confused when she took a look at Apple (AAPL) CEO while wearing a Vision Pro headset and mistakenly thought he was looking for a virtual interpretation of the computer giant’s top executive, instead of the real McApple.

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The two men were standing in front of Apple’s flagship store in New York, where the new iPhone 16 was being sold.

“I try to come to Fifth Avenue because it’s kind of the center of the world and the excitement is so incredible there,” Cook said during the video segment.

During a walk through the Upper East Side Apple Store, Fallon asked Cook what excited him about the new iPhone.

“I’m excited about it all, to be honest,” he said.

Maybe so, but that excitement doesn’t seem to be catching on with consumers as much as previous iPhone launches have.

Apple, which unveiled its latest iPhone model last month, is looking to use it as a launching pad for a series of artificial intelligence initiatives, called Apple Intelligence, that it plans to infuse into its base of 2, 2 billion users.

The various AI-based tools will be rolled out gradually over the coming months and only in select markets as Apple faces development challenges, regulatory pressures and increased competition in the global smartphone market.

Analysts are concerned about the demand for THE iPhone 16.

Analyst cuts Apple iPhone forecasts

This appears to be affecting early demand for the iPhone 16, with reports of shorter lead times, a measure of how long it takes to make and fill a consumer order, compared to previous phone launches.

Apple doesn’t release preliminary sales figures, so analysts use a range of measures to estimate how sales are doing.

Related: Analysts question pace of iPhone 16 demand as Apple inventory expands

According to TF International Securities, Apple sold 37 million iPhone 16s in its first pre-sale weekend, down 12% from the iPhone 15 debut in 2023.

The iPhone is Apple’s best-selling product, and investment firms have responded to the company’s current challenges.

On October 1, Citi analyst Atif Malik cut the investment firm’s forecasts for iPhone units in the September and December quarters by 2 million each and now expects iPhone 16 units to be 83 million this year, according to The Fly.

Malik also raised his March and June 2025 quarter iPhone unit estimates to 4 million and 7 million, respectively. Citi now expects iPhone units in 2024 and 2025 to be 224 million and 246 million, respectively, or down 3% and 9% year-over-year.

With Apple Intelligence launching in the US later in October and a major update to Siri digital assistant likely next year, the iPhone refresh will come in 2025 with the launch of the iPhone 17, Malik said.

He also says the shorter delivery times for the iPhone 16 series reflect better supply. More importantly, consumers are likely waiting to see how Apple Intelligence will affect their daily interaction with their phones before upgrading.

Malik affirmed a buy rating on Apple with a price target of $255.

Barclays: Apple cuts supplier orders

Barclays said the company’s channel checks indicate that iPhone 16 orders were down for the December quarter at a key supplier in Taiwan.

The company previously discussed shorter delivery times for iPhone 16 models globally, both of which indicate lower demand for the iPhone 16.

Barclays said Apple may have cut about 3 million units at a key supplier of iPhone semiconductor components for the December quarter. If this cut is confirmed, it would be the longest construction cut in recent history, the firm said.

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Barclays checks show a 15% year-on-year drop for global iPhone 16 sales in the first week of sales.

It also tracked iPhone availability across geographies globally, suggesting lower demand for the 16 compared to last year. The firm maintained an underweight rating on Apple with a price target of $186.

On October 2, JP Morgan analyst Samik Chatterjee said that the iPhone 16 has been available to consumers for just over a week and that the launch is “lacking early momentum” for the high-end models compared to previous cycles, according to The Fly. .

The difference in delivery times compared to previous years in the first few weeks indicates “less momentum” in early orders for the Pro models compared to JP Morgan’s initial expectations, the analyst said.

Investment firm expects ‘robust AI cycle’

Chatterjee said this is likely due to the unavailability of AI capabilities, with consumers likely delaying purchases until the features are available and the value proposition is better understood.

As a result, JP Morgan moderated its near-term iPhone unit forecasts and now expects total iPhone volumes to reach 126 million in the second half of 2024, up from 130 million previously and 132 million with a year earlier.

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That said, the company’s expectations for a “robust AI cycle” in the medium term remain unchanged, as it notes that the revision to near-term estimates represents only a modest uptick in volumes later in the cycle.

Chatterjee said he expected consumer appetite for AI-powered iPhones, including the 16 series, to grow with the wider availability of AI features. The firm maintained an overweight rating on Apple with a price target of $265.

In August, Apple reported a stronger-than-expected fiscal quarter, but iPhone revenue was at its lowest level since the quarter ended in September 2021 and fell 1 percent from a year earlier.

Apple is scheduled to report fiscal fourth-quarter earnings on Oct. 31, with initial estimates suggesting earnings of about $1.60 a share on $94.4 billion in revenue.

Apple is planning a new low-end iPhone model

Meanwhile, Apple is close to starting production of an updated iPhone SE that will serve as a new low-end model and is also looking to produce new iPad Air models, Bloomberg reported, citing people familiar with the matter.

The company is nearing production of an updated iPhone SE – codenamed V59 – that will become its new entry-level model.

Apple also plans to produce new iPad Air models and keyboards for release around the same time.

The launch will mark the first update to the iPhone SE since 2022, when Apple added 5G capability to the device. With the latest model, Apple will move away from the old home button design and move to an edge-to-edge screen.

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The company is also facing extensive damage from a fire at the Tata Group’s Apple iPhone component plant in southern India. That could hamper production ahead of a sales surge in the festive season, Reuters reported on Oct. 1, forcing the U.S. company’s suppliers to source critical parts from China or elsewhere.

The fire caused an indefinite shutdown of production at Tata’s Hosur plant in Tamil Nadu, India’s sole supplier of iPhone back panels and other parts to both contract manufacturer Foxconn in the country and its own iPhone assembly at another plant.

Hong Kong-based Counterpoint Research estimated local sales of 1.5 million units of the iPhone 14 and 15 models during India’s festive season, which runs from late October to early November, with Apple battling- to meet up to 15% of this demand due to fire.

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