Apple Inc. (NASDAQ:AAPL) shares fell to an intra-day low of $153.83 Wednesday, down 3.1 percent before they trimmed some of the losses and settled down 1.7 percent at $156.07 for the day.

Commenting on the weakness, B. Riley & Co. analyst Craig Ellis said it could be due to two reasons, namely weak China initial iPhone 9 preorders and Watch 3 LTE connection issues. However, the firm did not attach much significance to the sources of weakness, reasoning that it is too early to draw any conclusion.

Ellis noted that China's JD.Com Inc (ADR) (NASDAQ:JD) reported that China preorder numbers were at 1 million iPhone 8, notably lower than 2.5 million preorders for iPhone 7 and 3.5 million for iPhone 6. Ellis feels, if true, the data could engender regional product cycle demand concerns.

B. Riley & Co. also made note of Watch 3 LTE connection issues carried in several published product reviews and acknowledged by Apple.

Preorder Decline Isn't Surprising

Though acknowledging that the data raises regional demand risk, the firm thinks it is too early to draw broad-based product cycle conclusions. Lending credence to its deduction, the firm noted that Apple's China sales have been on the wane for the past six quarters, with the decline over the last four quarters averaging 16 percent.

Analysts Take The Measure Of Apple's iPhone X

Given the trend, the firm doesn't consider the preorder decline as a surprise. However, the firm noted that investors have come to expect year-over-year product cycle strength. Therefore, the firm said if China is weaker year-over-year, other regions need to outperform. For that to happen, the firm said improving global developed and emerging economy GDP growth is a must.

Additionally, the firm noted that the observation's sample is small for projecting it to the global trend. The firm said it wouldn't be surprised if stronger demand emerged elsewhere, in China or in other regions.

Thirdly, B. Riley & Co. believes demand is being drawn elsewhere at the moment, given increased competition from fast-growing and value-price focused China tier 1 OEM's such as Huawei, OPPO and Vivo. Also, the firm noted that Samsung Electronic (OTC: SSNLF is much better positioned, transforming the competitive landscape as a robust one.

The firm also thinks the third-quarter guidance of chipmakers was relatively conservative, given their cautious stance as they took cues from their past experience of being burned by iPhone product cycle weakness.

"So for that and other reasons we doubt the data point by itself puts estimates at risk," the firm said.

Companies Exposed To iPhone Product Cycle

"The competitor report raised a yellow flag of risk that the product cycle is less robust than we and other would like, and we will continue to monitor preorder and initial sales indications to calibrate demand versus expectation, though at present do not see estimate risk for covered names with iPhone exposure," the firm concluded.

At time of writing, Apple shares were sliding 1.40 percent to $153.86.

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