News reports of softening demand for the iPhone X are
worrying investors ahead of Apple’s upcoming earnings
Apple’s stock is down roughly 5% in recent
A note by GBH Tech Research predicts near-term
turbulence for Apple, but says the long view is
December quarterly report, scheduled
for Thursday, is one of the most hotly anticipated reports of
this earnings season.
The debut quarter for the $999
iPhone X will be closely scrutinized by investors looking for
a read on Apple’s prospects in 2018. The success or failure of
this pricey, ultra-premium new phone will inform Apple’s iPhone
strategy going forward.
As it is, investors have already been spooked by a steady stream
news reports suggesting soft demand for the components that
go into the new iPhone.
“The Street has gone into ‘full panic mode’ as supply chain
checks out of Asia indicate that March iPhone shipments are
trending below expectations,” writes GBH analyst Dan Ives in a
research note on Friday.
While Ives believes Apple will notch solid results in the
December quarter, driven by stronger-than-expected iPhone
shipments and high average selling prices, he says Apple’s
guidance will be what really moves the stock.
Wall Street estimates currently forecast that Apple will generate
roughly $68 billion in sales in the first three months of 2018
and ship about 62 million iPhone units. But with every news
story about weakening demand for the iPhone X, fears are
“running rampant on the Street that Apple will guide
significantly below expectations for this upcoming quarter,” Ives
So far those worries have pushed Apple’s stock down about 5% from
its recent high of $180 earlier this month. And given that
Apple’s stock is still trading near its 52-week high, there’s
plenty more room to fall if the company confirms people’s fears
with a weaker-than-expected quarter.
Apple is in a ‘hand holding period’
Ives is actually an Apple bull, giving it a “Highly Attractive”
rating and a $205 price target.
But his thesis assumes some near term hiccups, and he describes
this as a ‘hand holding period.’
He predicts that Apple will miss Wall Street iPhone targets in
the March quarter, with shipments between 57 million and 61
million, versus the 62 million average analyst estimate.
And he’s taken down his 2018 iPhone estimate from 255 million
units to 240 million units.
So what makes him so optimistic?
As many as 350 million iPhone customers could potentially upgrade
to a new device over the next 12 to 18 months, he says. And
3 forthcoming iPhone models to be released in the next six to
nine months, giving users more reasons to upgrade.
“We believe the combination of stronger than expected ASPs, a
‘push out’ of roughly 15-20 million iPhones from FY18 into FY19,
repatriation/buyback tailwinds, multiple device launches on the
horizon, and a China growth story which is showing signs of
renewed growth prospects (albeit with some soft spots) gives
us confidence that Apple will be able to navigate near term
headwinds and emerge a stronger fundamental story exiting 2018.”
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