“iPhone cycles are made or broken in the March & June quarters.”
From a note to subscribers by Loup Ventures’ Gene Munster:
Expect Investor Optimism to Be Tempered with Concern Near Term. Over the past year, investors have been anticipating a shift in the iPhone growth from flatfish in FY17 to high single digits in FY18 (we’re modeling for 8% iPhone unit growth in FY18). Shares of AAPL have risen 54% during that time driven by this improved iPhone growth outlook along with a more optimistic view that Services growth will be sustainable in the 15-20% range through 2020. For the balance of 2017, we expect history to repeat itself and optimism around the next iPhone to be tempered with concern about the iPhone cycle’s tail, specifically wavering investor confidence in iPhone growth in the Mar-18 and Jun-18 quarters (iPhone cycles are made or broken in the March & June quarters).
Don’t Let Short-Term Distractions Minimize the Long-Term Apple Story. Despite near term shifts in investor optimism, we remain positive on Apple’s story long-term. Over the next year, we expect to see two camps emerge on the Apple story: The first camp will remain positive on Apple despite little to no iPhone growth over the next few years if Services meets Cook’s goal of y/y growth in the high teens. The second camp will be more pragmatic, wanting to see Apple make a push into AR & auto to set the stage for higher growth over the next decade. We remain optimistic that Apple will be a significant player in the shift to AR-driven computing with potential growth from Apple’s car project representing option value.
My take: A third camp will not be shaken from their conviction that Apple is doomed.