Apple iPhone Sales Face Slowdown Risk In March Quarter, Detwiler Fenton Warns
- In a report issued Tuesday, Detwiler Fenton analyst Jeff Johnston said the March quarter is shaping up to be disappointing in terms of U.S. smartphone sales.
- He explained that surging inventory levels are the latest sign of the weakness in the U.S. smartphone market.
- In this context, the firm believes iPhone sales face the risk of experiencing a year-over-year decline in the March quarter.
Based on recent checks, analysts at Detwiler Fenton think the March quarter is shaping up to be a sluggish one, with volumes down about 10 percent year-over-year. OEM inventory levels seem to be rising on the back of weaker-than-expected orders from U.S. carriers.
T-Mobile US Inc (NASDAQ: TMUS) seemed to bring good news this quarter. Apparently, smartphone sales were quite strong, driven by the carrier’s share gains. On the other hand, volumes at Sprint Corp (NYSE: S), Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) seem light "as smartphone penetration reaches saturation levels and the upgrade cycle extends."
Related Link: Do People Prefer Their Older Smartphones?
None of this spells good news for Apple or QUALCOMM, Inc. (NASDAQ: QCOM), which recently announced some surprisingly strong MSM figures that "suggest the company could be at risk for an inventory correction next quarter." On a year-over-year basis, Qualcomm will gain from increased share at Samsung with its upcoming Galaxy S7. However, the experts are worried about this being somewhat overshadowed by rising inventory levels.
In addition, Johnston and his team believe that while Apple is outperforming the market, it looks like "iPhone sales are at risk of being down y/y in the March Q. Given our latest N.A. checks, it would seem that the Chinese market would have to substantially outperform to avoid this from happening."
Forbes' Parmy Olson seemed to agree with this premise. In a recent article, she stated, "Expectations are high for the iPhone to blast through the 74.5 million mark [hit on the first quarter of 2015] and show another set of spectacular numbers after this coming Christmas season. Yet there's still some reason to be cautious about how long this incredible growth will continue, and with a string of spectacular quarterly performances behind it, Apple has a tricky job managing expectations."
Bernstein analyst Toni Sacconaghi recently said Apple's impressive growth days are now past. He models iPhone sales of 75 million units for the quarter, a slight year-over-year improvement.
"[Apple] had the great, last cycle with the iPhone 6. The fear is that smartphones are an increasingly mature market particularly at the high end," he told CNBC. "That's almost all of Apple's earnings and growth. And accordingly the concern is it won’t really grow going forward."
"I think there's a fear in the investment community that December will be fine, and iPhone sales will grow, but thereafter they won't," Sacconaghi added.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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