Mikey Campbell
Ahead of Apple's upcoming quarterly earnings report, investment firm Piper Jaffray lowered iPhone shipment estimates to 55 million units for the current quarter, but maintains AAPL is the year's top stock pick.
In a note to investors on Monday, analyst Gene Munster estimates Apple to ship 55 million iPhones in the current March quarter, down from previous predictions of 62.5 million units. June quarter expectations are also lower, down from 48.5 million units to 45 million. The downward adjustment is in response to collective circumstantial evidence of slower-than-expected production from Apple's supply chain.
The estimate reduction pulls Apple's revenue expectations to $55.8 billion for March, down from a prior estimate of $60.7 billion. Munster believes Wall Street is expecting revenue of $59.7 billion on 58 million iPhone sales.
Over the past month, a number of investment firms cut iPhone estimates on supply chain chatter claiming Apple recently trimmed parts orders. Morgan Stanley was among the first to slash expectations, followed by RBC Capital Markets, J.P. Morgan and FBR & Co.
A Nikkei report last week put numbers to rumors, saying suppliers are bracing for decreased iPhone 6s parts orders that could be 30 percent lower than initial models. Actual supplier guidedowns were in the 10 to 15 percent range, Munster says.
"While Apple has repeatedly stated in the past that the changes in orders from any given supplier are not indicative of the health of the iPhone business overall, we believe that the combination of three supplier guidedowns (Dialog Semiconductor, Qorvo and Cirrus Logic) as well as the Nikkei story suggesting production cuts from last week are too much collective evidence to not adjust iPhone expectations," Munster writes.
The statement sends a different message than a note Munster issued last week reminding investors that supply chain rumors have no bearing on actual sales. That report did not detail Piper Jaffray's March estimates.
If March quarter iPhone sales come in under 61.17 million units, it will be the first year-over-year decline since the device launched in 2007. There are fears that Apple has reached "peak iPhone" and is seeing a natural slowdown in sales as mature markets reach saturation.
As for the just ended quarter, Munster expects revenue of $76.5 to $77.5 billion on sales of 75 to 76 million iPhones, 5.8 million Macs and 17.5 million iPads. He pegs gross margins at 40 percent.
Finally, Munster estimates Apple to have sold 6 million Apple Watch units in the recently ended December quarter. The analyst is looking to 2017 as a "breakout year" for Watch, saying he expects 20 million units to ship in 2016, followed by 40 million units in 2017.
Looking ahead, Munster sees iPhone returning to 5 percent year-over-year growth in the quarters ending September and December, as Apple is widely expected to maintain its usual yearly iPhone hardware refresh cycle this fall. For "iPhone 7," Munster predicts Apple might use 3D Touch in place of a home button and could incorporate a sapphire glass display.
Piper Jaffray maintains an Overweight rating for AAPL with a $179 price target.
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39 Comments
Nikkei reported 5s production to "plummet" by Fifty Percent for the March 2013 quarter. Did. Not. Happen.
Doesnt AI even read their own stuff?
"Analyst: Nikkei iPhone 6s supplier story says nothing of iPhone demand; site wrong before in 2013
oh and speaking of that quarter. What ever happened to the holiday quarter? Skipped that result have we?
oh and Cirrus Logic? Been there, didn't do that.
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Cirrus Logic's drop in revenue points to decline in Apple iPhone sales
Posted: 17 Apr 2013, 22:42, by Alan F.
This note just shows what a herd mentality there is on Wall Street. One minute Munster says you can't read anything into supply-chain reports, the next Piper Jaffray is lowering iPhone estimates because of these same supply chain reports. Does Munster really believe believe people aren't buying the 6S because it doesn't have a sapphire screen? He thinks a 3D Touch will replace the home button even though there have been zero rumors about that and zero evidence that Apple is ready to integrate Touch ID into the display? There is not one Wall Street analysts who has provided a compelling reason why 6S sales are soft but 7 sales won't be.
Mark Hibben at Seeking Alpha always provides a reasonable, well thought out take on Apple. I recommend his Jan 6th article 'Apple's App Economy Indicates Increasing iPhone Sales Momentum' in which he discusses the Nikkei report in light of recent holiday app store sales. He often credits Apple Insider and Daniel Eran Dilger in his Apple articles. From the article: "If the rumors are just nonsense, why doesn't Apple simply make an announcement setting the record straight? I've often read complaints to that effect from investors. Certainly, Apple could do that. However, I think it would be ill-advised. Apple is already the most transparent of the large technology companies, reporting specific unit shipments for each of its product categories, which its large competitors such as Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Samsung (OTC:SSNLF) do not. For Apple to disclose its specific sales forecasts for the coming quarter would be unprecedented, and potentially provide some strategic advantage to its competitors. One possibility is that the negative supply chain rumors are an attempt to flush out just such a disclosure from Apple. If that's the case, so far Apple isn't falling for it."