Analyst: iPhone X demand not living up to high expectations

From a note to clients by Deutsche Bank’s Sherri Scribner that landed in my inbox Tuesday:

Recent datapoints on iPhone sales continue to point to weaker-than-expected demand for the new iPhone models (X, 8 and 8+). This is not a surprise to us. We have been arguing since last February that iPhone demand expectations were too optimistic and that the higher price of new models would pressure unit demand. This appears to be playing out, with numerous Asian supply chain data points suggesting iPhone production plans are being cut. While we expect AAPL’s Dec Q results will be roughly in line, we think Consensus numbers for the March and June quarters remain too high. Thus far, AAPL’s shares have not reflected lower-than-expected iPhone demand, as the stock has been helped by the strong markets and passive investment strategies. However, we expect shares to re-rate modestly lower over the next few quarters as iPhone numbers disappoint. With support from strong markets offset by weakening fundamentals, we see shares as fairly valued in the low-$150 range.

Maintains hold and $152 price target. 

My take: Consensus numbers for the March and June quarters may indeed be too high, as Schribner has been warning for nearly a year, but her market-low $152 price target still seems too low.


  1. Gary Morton said:
    March and June consensus revenue numbers are probably still too high. However, very few of the analysts have factored in the dramatic change coming in the tax rate. Apple currently books about 24% of earnings before tax. Given the new tax law, this rate will drop to between 12.5% and 16.0%. My best estimate is about 14.1%. That means the consensus earnings numbers are way too low. Even if the revenue numbers in all the models come down, the tax rate will drive earnings well above current estimates. It is hard to see how fiscal year earnings could not reach at least $12 per share given the tax changes, growth in services, the current FX environment, and continual decrease in share count. How will the market react when they gain a greater understanding of this on Feb 1, who knows? Intel went up 10% post earnings call on what was fundamentally just a recognition of their change in tax rate. But, Apple is always held to a different standard.

    January 30, 2018
  2. John Kirk said:
    I’m suspicious of all these “sold less than expected” forecasts. But let’s set that aside for a moment.

    I wasn’t at all sure I was going to do it, but I ended up upgrading to the iPhone X. I’m no genius, but I know this: The phone X is a winner. Even if the iPhone X sold fewer units than originally predicted, I am still super confident that it is the future of Apple — and a good future at that.

    January 30, 2018
    • Fred Stein said:
      Good points re iPhone X. It seems strange that folks (consensus at $66.1M) are so bullish right now. I’m fine if the current “X” trails off. Tons of buyers will come in over the next four years as Apple brings in lower cost ‘X’ phones.

      Just look at the surge in the SE with just a $50 price cut. (per CIRP)

      January 31, 2018

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