Key points:
- Apple stock is down on the story that a production increase has been cancelled
- The previous belief was that the iPhone 14 would lead to a 7% increase in production
- The key point here is market belief – neither story has been confirmed or not by Apple
Apple (NASDAQ: AAPL) stock was down 1.27% yesterday and is currently registering another 2.67% down premarket this morning. The cause seems to be a certain uneasiness about predictions of production runs. Given how little Apple communicates with the financial press pricing is always through a certain murk of rumour and counterstory. But we have to do the best we can with what information we do get – Apple is after all one of the bellwether stocks.
Following the announcement of the new models – iPhone 14 and so on – there was a story that went around the market about increased production runs. Planning for as much as a 7% increase in volumes produced. That would indeed be news for the margins on iPhones are famously large and that would have an effect upon Apple's bottom line – if they all sold of course. And also, of course, if the divining of production runs was correct: “Apple had upgraded its sales projections in the weeks leading up to the iPhone 14 release and some of its suppliers had started making preparations for a 7% boost in orders.”
Well, maybe it did and maybe it didn't but that doesn't, particularly, matter. Because the AAPL price is driven by what people believe about it. So, if the general market belief is a future rise in sales then the stock will likely go up – whatever Apple was actually planning.
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The reversal here is because the next story doing the rounds is that Apple is reversing that planned increase in production. There are predictions that the iPhone 14 Pro model – the more expensive and presumably with fatter margins – model will make up a larger portion of the sales mix than the previous generation, the iPhone 13. But even then if that planned 7% increase in total production isn't going to happen then Apple is – according to the stories – worth less than it was.
This is not conclusive though. For there are other things going on. Apple is gaining more revenue from services and less, as a portion, from hardware sales. Apple's sports streaming for example. Apple's NFL work as another. There're also those stories about increasing production in India. To the extent that this is an increase in global production that would be positive. To the extent that it's just doing the assembly inside India's tariff wall (mobile phone parts are generally tariff free into India, completed phones are taxed) then that's mildly interesting but not very.
Apple's a large enough part of the market that not only have supplier stock prices fallen on this story of the cancelled increase in production, so too have stock futures as a whole. For if the iPhone 14 is about to sell in greater quantities or not, then what does that tell us about the global economy as a whole?
But the really big lesson here is that it doesn't in fact matter what Apple's plans were for these short term AAPL stock price movements. It's what people believe that does. Maybe the 7% production increase never was planned. Maybe it has or has not been cancelled – the price moves depending upon what the market as a whole believes about those things.