Citi Cuts iPhone Unit Estimates Ahead Of Apple's Q4 Report
- Shares of Apple Inc. (NASDAQ: AAPL) are roughly flat year-to-date, but lower by nearly 13 percent over the past three months.
- Ahead of Apple's October 27 earnings release, Jim Suva of Citi lowered his iPhone unit sales estimates.
- Suva did maintain a Buy rating and $145 price target as Apple's investment thesis will shift to a gross margin upside story.
Shares of Apple remain volatile heading into earnings season as the company will report its fourth quarter (September quarter end) results on October 27.
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In a report published Monday, Jim Suva of Citi lowered his iPhone unit sales estimate for the fourth quarter, noting that many other sell-side analysts are expected to follow suit in the coming weeks. The analyst is now expecting Apple to report it had sold 47 million iPhone units (from a prior estimate of 48 million units) as not all of its 13 million first weekend iPhone 6S and 6S Plus sales will be including in the fourth quarter print.
Suva noted that his total iPhone units for the combined September and December quarter have not changed.
Suva said shares of Apple will likely continue to be volatile heading into the earnings print. The analyst also suggested that the investment thesis surrounding owning Apple's stocks will shift from an "iPhone beat and raise" to a "gross margin upside" story as a continued shift towards higher memory and larger screens sizes are "net margin expansion drivers."
Looking forward, Suva stated that Apple's investment thesis may shift once again to an iPhone unit growth story when the company releases the iPhone 7. In the interim, Apple will need to lap a transition year which consists of a difficult comp year for the iPhone 6S following the "stellar" unit growth of the iPhone 6.
Shares of Apple remain Buy rated with an unchanged $145 price target.
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