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Analyst Cuts iPhone Estimates Ahead Of Apple's Q1 Report

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Analyst Cuts iPhone Estimates Ahead Of Apple's Q1 Report
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Stifel’s Aaron C. Rakers stated that the “analysis of the various highly correlated monthly iPhone data points” tracked through the quarter indicate an implied iPhone sell-thru in the low-70 million range for 2017's fiscal first quarter.

Rakers maintains a Hold rating on Apple Inc. (NASDAQ: AAPL), with a price target of $115.

Estimates Cut

Based on an analysis of iPhone demand data points over the past three months, the revenue estimate for FQ1:17 has been lowered from $76.7 billion to $76.0 billion, while the EPS estimate has been reduced from $3.23 to $3.16, with both estimates now below the consensus.

The estimates reflect iPhone shipments of 73.4 million, a decline from the prior estimate of 76.7 million.

“We also reduce our F2Q17 and F3Q17 estimates to reflect flat y/y iPhone ship trends, which does reflect easing compares; however, we slightly increase our F2018 and F2019 estimates on increased iPhone 8 cycle optimism,” Rakers mentioned.

iPhone 8 Expectations

The analyst expects Apple to provide initial production estimate for the iPhone 8 in July-August, and stated that an estimate of 90 million should be considered positive, given that historical figures and Street models suggest a range of 80–85 million.

While investors now expect a high-end AMOLED display for the iPhone 8, Rakers believes that “Apple's possible integration of 3D sensing in the next-gen iPhones could be considered a killer app and provide renewed confidence in Apple's innovation engine.”

The analyst estimated the iPhone installed base at 700 million, and a 30 percent pre-iPhone 8 installed base upgrade would equate to 210 million iPhones or 70 percent of the total iPhone shipment estimate for December 2017-December 2018.

Latest Ratings for AAPL

DateFirmActionFromTo
Jan 2018Morgan StanleyMaintainsOverweightOverweight
Jan 2018Atlantic EquitiesDowngradesOverweightNeutral
Jan 2018Longbow ResearchDowngradesBuyNeutral

View More Analyst Ratings for AAPL
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