Cleveland Research Ambivalent On Apple

Cleveland Research Company analyst Benjamin Bollin seems to be one of the few people not excited a day after Apple Inc.

's WWDC. In a note published Tuesday, Bollin reiterated a Neutral rating on the Cupertino firm with a price target of $127.80. Bad Signs for iPhone He says that suppliers are reducing 2015 iPhone sales forecasts from a high end of 230 million to a high end of 220 million. Some discussions he has had with partners indicate potential for sub-220 million volumes. He attributes the decline in forecasts to a drop in demand, especially for the iPhone 6 plus, "now believed to be 25% of the mix vs. prior 30%." Bollin also points to constraints on the supply side. He notes that the Force Touch sensor, which is expected to be in the next-generation iPhone, is facing yield issues and could those limit Apple's ability to meet a wave of new demand in the final months of the year. The issues of supply and demand could spell trouble for Apple, he says, given that the product supports over 60 percent of the company's revenue and over 80 percent of its profits. Watch Demand Down Demand for the new Apple Watch is also slowing since the product's launch, according to Bollin. He attributes the softening demand to "limited app ecosystem, poor battery life, and high price." Cleveland Research's industry contacts now expect only about 10 million units to be sold during the year, compared to previous estimates of about 15 million. iPad Refresh Expected This Fall One potential upside for Apple, according to Bollin, is a new model of the iPad, which he expects to be released toward the end of this year. He says the refresh could potentially feature a larger screen, a stylus, and even a removal keyboard. Bollin believes the device will be targeted at enterprise and education consumers as a complete PC replacement. His sources tell him that the new enterprise-focused apps for the iPad are being received favorably Overall, he says that iPad forecasts remain "challenged" compared to early year estimates, but the downward trajectory has moderated. According to him, shipments have stabilized Q/Q. Bollin sees the combination of softening iPhone demand and flattening iPad shipments as a near-term margins headwind, but expects this issue to abate with time. Apple's stock is trading down today, as is typical following its WWDC.