The Effect On Apple As Phone Upgrade Rates Could Be 'Permanently Lower Than Historical Norms'

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Investors hoping
Apple Inc.AAPL
will smash all smartphone sales records with its soon-to-be-released
iPhone
may need to take a step back and consider what
Maynard Um of Wells Fargo has to say. Um highlighted a headline from AT&T Inc. T in which the telecom giant said it is expecting upgrade rates from consumers to be permanently lower than historical norms.

AT&T noted that its equipment revenue fell $0.5 billion in its recent quarter and this was attributed to a record-low upgrade rate in which it sold one million fewer phones than the same quarter a year ago. When the company was asked if this represents a permanent or cyclical trend, the company said it believes this trend is here to stay.

Smartphone owners looking to buy a new phone aren't as compelled to do so today; software upgrades are sufficient — especially at a time when consumers are spending less.

iPhone To The Rescue?

Um continued that AT&T's management acknowledged its upgrade rate would tick higher with the introduction of new devices. However, the upgrade rate would still be down on a longer-term basis. Um even stated that the all-powerful Apple would find its growth trends difficult to maintain if AT&T's assessments are accurate.

"Whether this is a cyclical smartphone blip or the start of secular downtrend bears watching," Um concluded.

Bottom line, the potential for Apple to face challenging growth prospects prompted the analyst to maintain a Market Perform rating on Apple's stock with an unchanged valuation range of $135 to $145 per share.

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Apple's Next Couple Quarters Might Be Less Important Than Usual No Ordinary iPhone, No Ordinary Cycle: Morgan Stanley Says Consensus Estimate On iPhone 8 Falls Short
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Posted In: Analyst ColorReiterationAnalyst RatingsTechiPhoneiPhone 8iPhone UpgradesMaynard Um
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