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Early Checks For Apple Products Coming In Mixed

Early Checks For Apple Products Coming In Mixed

The early checks for Apple Inc. (NASDAQ: AAPL) products remain mixed, attributed to softer iPhone demand and the potential 4"-launch not expected to drive incremental volumes. Meanwhile, a recent report on saturating consumer electronics market indicates better-than-expected performance for wearables such as Apple Watch.

Ben Bollin of Cleveland Research said iPhone demand muted through June 2016 quarter with full-year outlook increasingly predicated on iPhone 7 success.

"Discussions at MWC suggest iPhone volumes are trending in-line to slightly softer vs. last month's discussions, with Mar-16Q trending to ~50 million and Jun-Q to ~45 million. Competition, geographic challenges (China), and enthusiasm for the current product refresh are all viewed as contributing to the challenging performance," Bollin said in a note to clients.

Related Link: Apple Watch Holiday Numbers Are "Awful"

Cleveland Research, Looking Ahead

Optimism around the 7 was also more muted, though this appears to be predicated on the near-term demand softness. Expectations for iPhone 7 unit recovery suggest low-single digit growth, softer than previous conversations of 5–7 percent growth. Slowing smartphone demand and increased competition at the high-end are all seen weighing on results near-term, with little offset from Watch or iPad.

Apple is said to launch a refreshed 4.3"-form factor device in calendar second quarter, likely the iPhone 5SE or 6c. The device is expected to feature an A9 chip and be priced at the same range as the 5S. The analyst said the "launch not expected to drive incremental volumes."

The analyst noted that iPad and Watch outlooks uninspiring over next six to nine months. Discussions at MWC did not suggest any change to the challenged outlooks for iPad and Watch. iPad continues to suffer from a soft tablet market and few catalysts for installed base refresh.

Bollin added that discussions concerning the Watch remain muted, with contacts expecting flat-to-slight growth in 2016, with volumes seen in the 10–15 million range. The expected refresh in calendar second quarter is not seen changing the outlook for Watch.

"We would look for greater visibility around the 7 before recommending the shares," said Bollin, who has a Neutral rating on Apple shares.

Another View

Separately, a report from Detwiler Fenton highlighted a contraction in consumer TVs, PCs and smartphone volumes. The report said consumer electronic volumes are generally "tracking off in 5–10 percent range in many categories" except for, Inc. (NASDAQ: AMZN) and Best Buy Co Inc (NYSE: BBY) products, which are continuing to gain market share.

The implied read through is that wearables segment may be relatively performing well, a positive for Apple Watch. Apple shipped 4.1 million Apple Watches in the fourth quarter of 2015, according to the latest data from International Data Corporation (IDC). The number missed consensus estimate of 5.5 million by 25 percent.

Image Credit: Public Domain

Latest Ratings for AAPL

Apr 2021BarclaysMaintainsEqual-Weight
Apr 2021Monness, Crespi, HardtMaintainsBuy
Apr 2021Credit SuisseMaintainsNeutral

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