Citi Cuts Apple's Second-Half Estimates, Sees Stock Range-Bound

Citi’s Jim Suva expects Apple Inc. AAPL shares to remain range bound in the near term, through the seasonally slow summer and prior to the iPhone 7 launch.

Suva maintains a Buy rating on the company, with a price target of $115.

Estimates Lowered

“We are lowering our estimates for June and September quarters given potential for lower demand from macro uncertainty (Brexit related), currency volatility and lengthening replacement cycles,” the analyst mentioned.

For the June quarter, Suva expects iPhone units to come in at 40.3 million, while the revenue estimate has been lowered to $$1.2 billion with gross margins of 38 percent and EPS of $1.35.

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The estimates are now below the consensus expectations, while Apple has guided to revenues of $41–$43 billion, with gross margins of 37.5–38.0 percent and EPS of $1.30–$1.42.

The analyst stated that supply chain checks indicate demand strength in iPhone SE should be partially offset.

For the September quarter, Suva has lowered the revenue estimate to $45.4 billion, with gross margins of 37.8 percent and EPS of $1.54. These estimates are also below the consensus expectations for the quarter.

Suva believes investors will soon begin to look beyond the near-term stock price weakness to near-term sales and gross margin disappointment.