Credit Suisse: OLED iPhone supply chain tight

From a note to clients by Credit Suisse analyst Kulbinder Garcha that landed in my inbox Tuesday: 

Supply chain tight: We now lower our C3Q/4Q's iPhone unit estimate to 43.5mn/82.3mn and lower CY17 unit to 221mn from 229mn, reflecting the supply parts tightness of the OLED version, which we believe will start shipping in October. However, we continue to highlight a degree of pent up demand from the iPhone installed base ahead of the major iPhone 8 super cycle with CY18/19 unit estimates at 248mn/268mn, as well as a continued mix shift toward the highest end model...

iPhone installed base supports LT units at 270mn... Our estimates could still prove conservative, as we assume a replacement cycle of 31.5/31/31months in 2017/2018/2019, relatively flat vs 31months in 2016. In addition, we see a strong mix of the OLED version at 48% in 2H17, rising ASPs for the coming cycle to $704 in CY18 from $647 in CY16, and growth of Services to offset the potential BOM pressure.

Services doubling revenue by 2020, to rise to 1/3 of GP. We estimate that with the existing slate of services, Services revenues could rise to $52bn long term from $26bn, driven by a high quality, affluent, digitally transacting user base of 1.1bn devices and around 650mn users. Given that GMs are around 70% for this business, it would suggest that services will contribute $39bn in GP long term from $19bn today, driving GM over 40% over time.

Maintain Outperform rating and $170 price target. 

Note: Because he didn’t provide enough estimates, Garcha didn’t make the final Earnings Smackdown list last quarter. If he had, he would have come in 21st out of 28 Apple analysts.

One Comment

  1. David Drinkwater said:
    More nautical references? I’ll bet that’s not what a real supply chain looks like! 😉

    July 26, 2017

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