Oppenheimer Sees Near-Term Challenges For Apple, But Bullish On 2018 iPhone Cycle

The consensus expectations for Apple Inc. AAPL do not appear to be accounting for an elongated replacement cycle in FY17, Oppenheimer’s Andrew Uerkwitz said in a report. He reiterated a Perform rating on the company, while stating that the FY17 iPhone shipment estimate was the lowest on the Street.

FY17 Expectations

Oppenheimer’s estimate for Apple’s FY17 iPhone shipments is 10 percent below the consensus, which does not seem low enough to incorporate an elongated replacement cycle, analyst Andrew Uerkwitz mentioned.

The FY17 iPhone shipment estimate reflects a 6.4 percent y/y decline to 197 million units, due to “a weak replacement cycle, competitive threats, and tough iPhone SE comps.” This compares with the consensus estimate of 221 million units, representing 5 percent y/y growth. “We believe consensus estimates are at risk for the coming March and June quarters,” Uerkwitz wrote.

FY18 Expectations

The analyst expressed his optimism regarding the FY18 iPhone cycle, citing “potentially substantial changes with new aesthetics and features that enable a better mobile VR experience.” The FY18 iPhone shipment estimate is at 245 million units, which is 3 percent higher than the consensus of 239 million units.

“Longer term, we expect wider swings in Apple's iPhone outlook and we believe challenges abound for Apple as the smartphone shipment driver shifts from market growth to changes in market share,” Uerkwitz commented.

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