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Credit Suisse Lowers iPhone Estimates Again, But Likes Long-Term Outlook

Credit Suisse Lowers iPhone Estimates Again, But Likes Long-Term Outlook
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  • Apple Inc. (NASDAQ: AAPL) shares have declined 12.95 percent over the past six months, while appreciating 0.1 percent year-to-date.
  • Kulbinder Garcha of Credit Suisse maintained an Outperform rating on the company, with a price target of $140.
  • The iPhone estimates for CY16 have been lowered by 8 million units to 214 million units, while the CY16 EPS estimate has been lowered by 4 percent, driven by supply chain weakness.

Analyst Kulbinder Garcha mentioned, however, “Longer-term, we continue to believe Apple will sustain high retention rates, continued installed base growth, and the optionality of a smaller 4-inch iPhone.”

Garcha also stated that there were several indications of increased cuts in production volumes in December and March quarters, driven by weak demand for the iPhone 6s.

Overall builds for the December quarter are now estimated at below 75-80 million units, while for the March quarter, overall builds are estimated at 45-50 million units.

Related Link: Evidence Apple iPhone Shares Have Peaked In One Chart

Looking Ahead

Therefore, the iPhone unit estimates for the December and March quarter have been adjusted slightly to 77 million and 52 million, respectively, while the estimate for CY16 has been lowered from 222 million to 214 million.

Although there are near-term pressures, Garcha believes that “the iPhone installed base will grow to 610 million over time driven by its recent expansion.”

In addition, according to the Credit Suisse report, “The new installment plans over time will drive higher units long-term.” Apple’s purchase obligations and recent capex guidance suggest that there could be 33 percent upside to the iOS unit estimate.

The FY2016 and FY2017 EPS estimates have been lowered from $9.54 and $10.25 to $9.22 and $9.89, respectively.

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May 2018Morgan StanleyMaintainsOverweightOverweight
May 2018BMO CapitalMaintainsMarket PerformMarket Perform
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