Analyst slashes his Apple target after survey finds weak iPhone XR demand

"Our surveys indicated soft smartphone demand with disappointing initial XR sales," analyst T. Michael Walkley wrote in a note sent out to clients on Thursday.

By the firm's projection, iPhone North America sell-through units to customers will decline to 75.1 million in 2019, from 78.7 million in 2018. That would be the first time the smartphone giant faces declining iPhone demand in more than seven years.

"While we believed the lower-priced iPhone XR would generate strong sell through trends, our surveys indicated muted demand versus our expectations," Walkley said.

"Feedback for lackluster initial sales included its inferior quality perception given its aluminum construction versus the XS and XS Max, lack of HD screen, and viable lower-cost alternatives in the older iPhone X and 8 models."

The tech titan began selling its iPhone XS and iPhone XS Max in September, and its iPhone XR model in October. But all recent signs have been pointed to waning demand of for iPhones.

Earlier this month, Apple reported underwhelming iPhone sales and said that its holiday quarter would be on the low end of expectations. And two weeks ago, a handful of iPhone suppliers - including Apple's main Face ID technology provider Lumentum and iPhone radio-frequency chip supplier Qorvo - cut their respective outlooks, citing a drop in demand from one of their biggest customers. Apple wasn't specifically named.

Last week, The Wall Street Journal reported that Apple in October cut its production plan for iPhone XR by up to a third of the nearly 70 million units it had asked some suppliers to produce between September and February. The company recently told several suppliers that it again cut its production plan for the iPhone XR, the Journal's sources added.

But Walkley remains bullish on Apple shares, reiterating his "buy" rating.