Munster: iPhone to return to growth in 2016 despite macroeconomic worries

In a research note prepared following Apple's earnings conference call, Munster pointed to AAPL shares trading down about 3 percent in after hours action, saying the company's outlook on the world economy was more cautious than anticipated. By his count, CEO Tim Cook and CFO Luca Maestri mentioned negative macro trends nine times during prepared statements, and another four in the Q&A session.

"While we were expecting some level of cautious macro commentary given the volatility in global stock markets, decline of commodity prices, and uncertainty in the Chinese economy, the level of caution described by Apple was greater than we would have expected," Munster writes.

In a rare move, Apple released supplemental material along with its usual 8-K SEC filing to demonstrate the extent to which currency headwinds impacted results. It was calculated that $100 of non-U.S. dollar revenue at the end of fiscal 2014 translates to only $85 in the just ended period, meaning first quarter 2015 revenue would have been $5 billion higher at "constant currency." This disparity was the first issue Cook addressed in today's call.

Apple recorded its best quarter ever in December, selling a record 74.8 million iPhones to rake in $18.4 billion in profit on revenues of $75.9 billion. In spite of its record-breaking performance, investors are concerned that iPhone unit growth, Apple's biggest revenue driver, is slowing.

Apple is guiding the first-ever decline in year-over-year iPhone sales for the current March quarter. Munster expects a year-over-year decline in the double digits this quarter, but points out Apple's own guidance is ahead of buy side expectations. Further, he believes March will likely be the nadir of iPhone growth for the next two years.

"If the macro headwinds continue to be an issue for AAPL, we would expect it to impact the entire market and would still view AAPL as a relative winner even in a down market environment as we believe tech investors would view the safety of Apple's capital return program as a positive," Munster writes.

Munster is modeling March iPhone at 53 million units, down 13 percent year over year but better than an initial negative 17 percent estimate. Judging by Cook's comments on the day, iPhone should improve throughout the year as an impending "iPhone 7" launch cycle approaches. Munster expects iPhone to be down 10 percent in the June quarter compared to 2014 and flat for the three-month period ending in September before returning to growth — 80 million units — in December.

Piper Jaffray adjusted its Apple price target down from $179 to $172 due to lower earnings per share, but the stock retains an Overweight rating as Munster's top pick for 2016.