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Bluefin Research Cuts iPhone Shipment Estimates Again; Figure Down By 40M From Peak

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Bluefin Research Cuts iPhone Shipment Estimates Again; Figure Down By 40M From Peak
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Expectations for Apple Inc. (NASDAQ: AAPL)'s latest iPhones have continued to dwindle ever since the launches of the iPhone X, its 10th anniversary phone, the iPhone 8 and the iPhone 8 Plus in September. 

The Analyst

Bluefin Research Partners analysts John Donovan and Steve Mullane lowered the firm's iPhone shipment forecast for 2018 yet again in a Wednesday note.

The Thesis

The ongoing reductions to iPhone forecasts are "going to be the norm" until new phones are released this coming September, the analysts said.

Bluefin's field checks revealed that build forecasts were cut again over the weekend, primarily for the iPhone X. 

Apple's iPhone X build plans have been cut by over 75 million units, with 6 million shaved off in the recent reduction, the analysts said. The phone's  price point — $1,149 for the 6.5-inch OLED version — and the small size are two concerns Apple "must address" in its forthcoming designs, according to Bluefin. 

Bluefin said total 2018 iPhone builds have been tempered by 60 million over the past several months to the current estimate of 228 million. And what's more, almost 50 percent of the total is set to come from the yet-to-be-released 2018 models, the firm said.

"Given the anemic demand with the current lineup, this forecast includes a fairly optimistic [second half] outlook for the new models and also highlights what we believe will be a challenging environment until the September new model launch," Donovan and Mullane said. 

Bluefin cut its shipment estimates to 219 million units for 2018, down 40 million from peak expectations, with the numbers equalling a mere 1-percent unit improvement from 2016 and 2017 levels. This is down from the 225 million units the firm estimated in its Feb. 24 update.

Bluefin is now meaningfully below consensus estimates for the first half of 2018, the analysts said. 

Bluefin's reduction has been mostly with respect to the iPhone X, for which it lowered its unit shipment estimate from 37 million units to 25 million.

Looking Forward

An expected 6.1-inch LCD version of the iPhone is the only model among the three slated for release in September that address price and size concerns, according to Bluefin. 

The firm expects the phone to be priced in the $749-$799 range. Apple should focus on lowering costs sufficiently to hit targeted margins at this aggressive price point, Donovan and Mullane said. 

"As we are basing much of our 2018-2019 recovery on AAPL properly addressing the pricing matrix to have top-end phones closer to $1,000, failure to make this change will further reduce demand in our opinion, creating yet another shortfall until 2019-2020 iPhones are released." 

The Price Action

Apple shares are up about 23 percent over the past year.

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KeyBanc Survey: iPhone BOGO Promos Have Limited Inventory Effect

Photo courtesy of Apple. 

Latest Ratings for AAPL

DateFirmActionFromTo
Sep 2018NomuraMaintainsNeutralNeutral
Sep 2018JP MorganInitiates Coverage OnOverweight
Sep 2018Bank of AmericaMaintainsBuyBuy

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