Guggenheim: Don’t worry about short-lived iPhone 8 delays

From a note to clients by Guggenheim Apple analyst Robert Cihra that landed in my inbox Monday night:

We believe Apple has some valid long-term issues that ultimately matter for the stock (e.g., size, elongating smartphone replacement cycles, China, Services) but do NOT think any short-lived delay launching its new high-end iPhone 8 SKU qualifies as one of them.

Rather, we believe its UNIQUE iOS means loyal users will WAIT, so any units pushed out of CY17 would just be pushed into CY18. Given the stock trades on forward numbers, that could even end up a boost, similar to how we see limited supply of OLED screens turning this iPhone into a 2-3 year upgrade cycle; helping push macro hurdles out to 2019-20E.

Apple reports Jun-qtr earnings on Aug 1 and we remain 3c ahead of consensus. We cut our Sep-qtr/FY17E EPS by 18c for a further delayed launch of iPhone 8 but just push that into FY18E, which pushes our EPS to >$11, now 50c ahead of consensus.

Reiterate Buy and $180 price target. 

Note: Katy Huberty made pretty much the same point over the weekend. See Morgan Stanley lowers Sept. iPhones, raises Apple target

Cihra adds this cool chart:

ASP vs PC

Click to enlarge. 

Cihra:

As detailed back in our 5/16/17 note A is for Apple; A is also for ASP we see the biggest upside driver of Apple’s economics over the past 10yrs having been iPhone ASP – e.g., we calculate that having increased an average 2%/year instead of declining at a deflationary pace like the 7%/year PCs did during their growth phase, that gap is now worth 60% of Apple’s entire iPhone revenue in FY17E.

2 Comments

  1. Robert Paul Leitao said:
    Apple is a huge cash generating enterprise that is returning hundreds of billions of dollars of capital to shareholders. As long as the capital return spigot is open wide and both buybacks and dividend increases continue, the company’s performance in any particular quarter has no impact on the long-term performance of the share price.

    Whether or not Apple’s flagship iPhone handset comes to market in September or October only matters to traders, not investors. Any traders attempting to play short-term share price pressure due to soft September quarter guidance run the risk of being left out in the cold as FY2018 estimates rise. Analysts are already raising forward estimates for next fiscal year.

    What basis is there for any claims the next flagship handset will be “delayed”? In my view it will arrive when it’s ready. Whether it arrives in late September or sometime in October is of no consequence whatsoever to long-term investors.

    3
    July 18, 2017
    • David Emery said:
      Well, “Sept vs Oct” might matter only to traders, but any delay past Oct might have an impact on Christmas sales. So it’s not quite ‘academic,’ I think.

      But all the stories about ‘delayed’ unannounced products are getting old.

      0
      July 18, 2017

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