Analyst asks: ‘How bad will Apple’s guidance be?

From a note to clients by BTIG’s Walter Piecyk that landed in my inbox Friday:

Smartphone upgrade rates remain at record low levels and do not appear poised to rebound in the first calendar quarter. Reduced iPhone promotions could be having an impact (as previously discussed), but the sustained lengthening of the replacement cycle appears driven simply by customer choice to hold onto their phone longer. We reduced our estimates in Apple as detailed in the note below and are concerned that revenue guidance for the March quarter could be as low as $60 billion versus a consensus of $68 billion.

Concerns about iPhone X sales have been well documented. Apple’s stock has shrugged off a slew of analyst and press reports that highlight these trends. Despite these concerns, Apple will still be able to grow its iPhone unit sales, just not necessarily at the rate that consensus expects. The incremental concern is whether Apple’s can hit or even come close to consensus revenue estimates in future quarters, due to its reliance on ASP growth. ASPs are now much more difficult to predict due to Apple’s broader and more price diverse product line.

We believe guidance for FQ2 revenue could be as low as $60 billion compared to current consensus of $68 billion. We reduced our FQ2 revenue estimate by $2.5 billion primarily based on a 7 million reduction in the number of iPhones we expect to be sold to 53 million. This was partially offset by a $33 increase in our ASP assumption, detailed below, and higher estimates for the iPad and Services segments. Our estimate reflects a sequential decline in iPhone ASP, while the consensus estimate assumes a sequential rise in ASP, which has not happened since 2011 when Verizon first started selling the CDMA version of the iPhone 4.

Price target unchanged at $198, but Piecyk advises clients to avoid trading the quarter given the wide range of ASPs.

Below his ASP spreadsheet:

asp chart
Click to enlarge.

My take: Piecyk is punting, and I can’t say I blame him. The Street is all over the lot.



  1. Robert Harris said:
    Not sure I agree with well documented. Katy’s estimates are much different on the high side

    January 26, 2018
  2. George Ewonus said:
    Pig pile for sure! I believe Chicken Little will weigh in on Monday.

    January 26, 2018
  3. Martin Beutling said:
    To be frank and honest: I am getting sick of this s..t.
    At first, they are concerned about revenue, then about earnings, then about EPS, then about the before mentioned points growth, then about building numbers, then about shipping numbers, then about sold numbers…..
    And NOW the are concerned about guidance? I forgot about these “tough comparisons” after break-out quarters.

    Is this where capitalism and financial journalism is heading?

    To be “concerned” about everything when a company is performing like hell?

    When will they be satisfied?

    I know that I sound like a fanboy, and this may be true, but first I am an investor who is sick about this line of spreading useless informations.

    January 27, 2018
    • Robert Harris said:
      Amen, it’s all about getting attention. If they wrote about amazon like this that Stock would still be at 700 and a multiple still 10 times greater than Apple . The US press loves to tear down the greatest company. Amazon is far less transparent does not give the detailed results by product or country the way Apple does and takes no heat for it. Apple protects your privacy and is criticized for it. They develop a way to keep your old phones running and congress the French and lawyers attack. They could have just let the batteries die and said tough luck. It’s not fair yet it’s one reason Apple has been kept undervalued. I just keep hoping they can keep buying back their stock. When the prices are low.

      January 27, 2018

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