iPhone 7 Estimates Trimmed, But This Analyst Anticipates Stronger iPhone 8 Upgrade Cycle

Canaccord Genuity’s survey work indicates the robust share gains by Apple Inc. AAPL in the first four weeks of the launch of the iPhone 7 have slowed in North America during November.

Analyst T. Michael Walkley maintained a Buy rating on the company, with a price target of $140.

Limited Supply

Walkley mentioned that demand for the iPhone 7 continues to outpace supply, especially for the iPhone 7 Plus model, which has impacted iPhone sell through trends.

“Based on the results from our survey, combined with the potential sell-in and sell-through impact from an earlier Chinese New Year, have led us to modestly decrease our 2017 iPhone unit sales estimates by 6M with most of the impact in the March and June quarters,” the analyst stated.

However, Walkley believes the iPhone installed base would cross 570 million customers exiting C2016, with the large installed base driving robust future iPhone replacement sales and earnings, along with cash flow generation to fund solid long-term capital returns.

“We still anticipate a stronger upgrade cycle in F2018 with the 10-year anniversary iPhone 8 likely released in September 2017,” the analyst went on to say.

Estimates Revised

The iPhone sales estimate for the March quarter has been lowered from 56 million to 53 million units, while the June quarter estimate has been cut from 46 million to 44 million units.

For C2017 and C2018, the iPhone estimates have been lowered from 236 million to 230 million units and from 245 million to 242 million units, respectively.

“Given the stronger demand and increased mix of the Plus models combined with our belief Apple will charge a higher price likely through increased memory SKUs for a potential new OLED form factor for the iPhone 8, we anticipate strong iPhone ASPs and margins through C2018,” the analyst added.

The EPS estimates for F2017 and F2018 have also been lowered from $8.90 to $8.78 and from $10.08 to $10.02, respectively.