Apple’s shares went down nearly four percent on Wednesday due to the company’s smaller-than-expected margin forecast. This drop in share prices raises certain concerns regarding the company’s ability to take advantage of the demand for its larger screen iPhones that typically bring in more money.
While the average analyst’s estimate of around 38.8 percent profit margins for the company, Apple forecasted margins around 38.0-38.5 percent.
The incredibly high demand for the iPhone 7 Plus was unexpected for Apple, and created a supply crunch that will most likely affect the company’s holiday sales. The iPhone 7 Plus, which is obviously bigger than the iPhone 7, sells at a higher price point and brings in more money per unit for the company.
Due to Samsung’s fiasco with the Galaxy Note 7, many analysts predicted Apple would have estimated a stronger forecast than the company actually did.
Apple shares were down 3.8 percent at $113.78 USD in early trading, the equivalent of about $25 billion in market value, said Reuters.
Despite drops in share price on Wednesday, many market analysts remain positive. “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,” wrote Mark Moskowitz, a Barclays analyst.
During an earnings call on Tuesday, Apple CEO Tim Cook stated that he believe that while the iPhone 7 will fall into market equilibrium this quarter, the iPhone 7 Plus may not.