Neil Hughes
RBC Capital Markets on Thursday became the latest investment firm to cut its estimates for Apple, joining the chorus of concerns that Apple could post its first-ever year over year decline in iPhone sales.
Analyst Amit Daryanani now believes Apple will ship 45 million iPhone units in the current March quarter, which is considerably below buy-side expectations on Wall Street, ranging from 50 million to 58 million.
To put Daryanani's estimate into perspective, Apple sold a massive 61 million iPhones in the March quarter of 2015. Shipments of 45 million in the March 2016 quarter would be a major 26 percent year over year decline.
His new estimate came from "discussions with a host of supply chain companies," he said in a note to investors, a copy of which was provided to AppleInsider.
To him, shares of AAPL will remain "range-bound" until the end of the March quarter. Beyond that, he sees iPhone sales returning to growth in the second half of calendar 2016, and potentially even in the June quarter.
Apple's production cuts are aimed at optimizing retail inventory, Daryanani believes. And while he cut his estimates, Daryanani said much of the discussion about Apple on Wall Street is simply "noise" that he believes will fade.
Daryanani still believes investors should buy in on Apple stock due to a number of factors, including higher average selling prices on iPhones and iPads, a potential 4-inch iPhone refresh targeting new price points, and higher gross margins.
However, despite maintaining an "outperform" rating, RBC has lowered its price target on AAPL to $130. That's down from its previous target of $140.
Shares of AAPL have taken a beating in recent weeks, following reports from a number of Apple suppliers who expect slower sales to start the new year. While none of the suppliers have specifically mentioned Apple, accompanying reports have claimed that Apple has cut new orders for its flagship iPhone 6s series in response to slower-than-expected sales.
Investors have been concerned that the astonishing growth seen by the iPhone since its launch in 2007 is coming to an end. Speculation about "peak iPhone" sales has been attributed to recent struggles for AAPL stock.
Most analysts on Wall Street continue to stand by Apple as a solid investment, though they do believe a first-ever year-over-year decline in iPhone sales is a real possibility in 2016. Expectations for the anticipated "iPhone 7" refresh, however, remain sky-high, with analysts predicting the iPhone will return to growth with a redesigned model this fall.
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12 Comments
I picked up 50 more shares at the open.
Isn't this just herd mentality at this point? And what is a 4" iPhone going to do? I'm sure it will sell well enough but I doubt it will be some major growth catalyst. I'd love to know which current Apple suppliers would disclose sales data to Wall Street analysts. It's one thing if it's a public company reporting financial results but I have a hard time believing all these Apple suppliers are going to be gossiping about iPhone part orders with financial analysts. Also, if there was going to be a significant decline in the March quarter is that something Apple would have go pre-warn about? Obviously they haven't provided guidance for March yet so there's nothing to revise. How exactly does that work?
Looks like we are going to see a 40% drop just like in 2014. That gives us a target of $80 per share. Market cap is now at $550 billion. Take out the $150 in net cash and the company is worth $400 billion.
There's been so much smoke their must be fire at this point. I'm expecting 'weak' sales for March quarter. Probably iPhone units down 5-10% YoY. I think all of this could have been avoided if Tim Cook warned investors last year that the iPhone6 cycle was very unusually because of pent up demand for larger phones. I wish he explained that during the iPhone6 cycle there would be 30% unit growth but during the next cycle there would be very little growth or a decline.
If you compare iPhone 6s sales vs iPhone 5s there is still a nice 25% unit growth and 30% revenue growth. That is great growth over 2 years.