Apple’s smaller-than-expected margin forecast sent the company’s shares down nearly 4% on Wednesday and raised concerns about its ability to capitalize on high demand for its bigger screen phones that bring in more money.
on Tuesday forecast profit margins of 38.0% to 38.5% for the current quarter, below the average analyst estimate of 38.8%.
Strong demand for the iPhone 7 Plus, which features two cameras, caught Apple off-guard, resulting in a supply crunch that is expected to affect holiday sales.
The phone has a higher average selling price than the iPhone 7 variant and brings in more money for the company.
Some investors had expected a stronger forecast from Apple as rival Samsung Electronics’
reputation takes a blow from the recall of its flagship Galaxy Note 7 phones due to fire hazard.
Apple shares were down 3.8% at $113.78 in early trading, wiping out about $25 billion in market value.
But Wall Street analysts were largely positive. At least six brokerages, including J.P. Morgan
and Raymond James
, raised their price targets on the stock.
“We take the company’s multiple references to iPhone 7 plus demand likely outstripping supply in (December quarter) as affirmation of the near-term lift to the iPhone business,” Barclays
analyst Mark Moskowitz wrote in a note.
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Apple Chief Executive Tim Cook said on a conference call on Tuesday that iPhone 7 will get into supply/demand equilibrium during the quarter, but iPhone 7 Plus may not.
“We believe this means the company could miss 500,000-1 million additional units if iPhone 7 Plus remains constrained through late December,” Piper Jaffray and Co
analysts wrote in a client note. The brokerage raised its price target on Apple’s stock to $155 from $151.
Only one brokerage—Stifel
—downgraded the stock to “hold” from “buy” and cut its price target to $115 from $130.
Of the 48 analysts covering the stock, 40 rate it “buy” or higher, six have a “hold” rating and two “sell” or lower.
The median price target is $131, according to Reuters data.