Barclays Analysts Find "Weak" iPhone 16 Demand After Supply Chain Check

Wall Street remains deeply divided on the demand outlook for the new iPhone 16. Some analysts believe the iPhone's new artificial intelligence features are driving a major upswing in the upgrade cycle, while others argue that demand for the higher-priced models has sputtered.

The latest note about iPhone 16 demand comes from Barclays analysts led by Tim Long and George Wang, who completed supply chain checks and found Apple likely slashed production of the new phone for the December quarter over weaker-than-expected demand.

"Our checks indicate that orders have been cut for Dec-Q iPhones at a key Taiwanese supplier. We have previously discussed shorter lead times across iPhone 16 models globally, both of which indicate softer demand for IP16, in our view," Long wrote in the note to clients on Tuesday morning.

The analysts uncovered in supply chain checks that about 3 million units may have been cut at a top Taiwanese supplier. This is followed by a recent report showing that global iPhone 16 sales were down 15% YoY in the first week of sales.

"Overall, possible iPhone build cuts, weak sell-throughs and shorter lead times suggest a softer start to the IP16 cycle with a negative mix shift due to weakening consumer spend, macro pressure and competition," they said, noting, "The roll-out of Apple Intelligence in Chinese language is not until CY2025, which may dampen early enthusiasm for IP16 in that important market. Europe is also likely to see a staggered AI launch through 2025, which could limit excitement for the new device."

If the analysts are correct about their supply chain checks, they explained, "We think Apple's order cut this time, if confirmed, implies the earliest cut in recent cycles as AAPL typically makes its first order adjustment in early/mid October based on sell-through data points."

Barclays maintains an "Underweight" rating on Apple and forecasts a price target of $186, down from its prior target of $233.

Shares in the premarket are down slightly over 1% to the $230 handle, trading shy of record highs.

We have cited several other reports that show the hyped-up AI iPhone launch cycle has likely disappointed:

Meanwhile, analysts from Morgan Stanley said lead times for iPhone 16 Pro and Pro Max models were stabilizing, marking an unexpectedly positive development. Also, JPMorgan analyst Samik Chatterjee noted that demand trends are improving via its Apple product availability tracker. This was enough to fuel Apple shares higher on Monday.

Last month, Wedbush Securities' Daniel Ives said this is the "beginning of an AI-driven iPhone supercycle."

In short, Wall Street analysts are all over the map, with no clear consensus on the demand for the iPhone 16 since the launch last month.

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