Canaccord Genuity trims '19 iPhone estimates 13%

"We continue to believe Apple can sustain double-digit Services revenue growth driven. — Analyst T. Michael Walkley

From a note to clients that landed on my desktop Saturday, two days late:

Lowering iPhone unit sales estimates: With our survey work indicating declining sell through share and disappointing overall sales due in part to soft smartphone demand combined with relatively high inventory levels, we are lowering our iPhone estimates. While we believed the lower-priced iPhone XR would generate strong sell through trends, our surveys indicate muted demand versus our expectations. Feedback for lackluster initial sales included its inferior quality perception given its aluminum construction versus the XS and XS Max, lack of HD screen, and viable lower-cost alternatives in the older iPhone X and 8 models. We have reduced our C’19/C’20 iPhone unit sales estimates from 180M/194M units to 177M/191M units.

Steady iPhone sales to growing premium tier installed base supports strong long- term ecosystem growth: Despite softer near-term iPhone sales trends, we anticipate Apple will sell over 175M iPhones annually helping to drive a growing ecosystem to drive ancillary revenue streams. We continue to believe Apple can sustain double-digit Services revenue growth driven by growth from the App Store, strong subscriber growth in Apple Music, Apple Care, iTunes/iCloud and Apple Pay. Further, our survey work indicates strong performance of wearables consistent with Apple’s pre-announcement indicating wearables grew nearly 50% year-over-year in the December quarter.

Reiterates Buy rating and $190 price target.

My take: Wish I had the details of his survey work, especially on wearables.

6 Comments

  1. Gregg Thurman said:
    We have reduced our C’19/C’20 iPhone unit sales estimates from 180M/194M units to 177M/191M units.

    I don’t care about no stinking unit estimates.

    What I want to know is how those changes in unit estimate impact revenue, a point completely missing from Walkley’s “note”.

    During CY2018 Apple sold approximately 210,000,000 iPhones of all stripes. Those sales generated approximately $162 Billion in revenue (~$770 ASP).

    If Walkley’s unit estimate is accurate then Apple will generate about $142 Billion (~$800 ASP) in revenue representing a YoY change in revenue of -$20 Billion (about -12%) that translates to about a 7% decline in total revenue.

    Offsetting that revenue decline is Accessory and Service revenue growth of about $15 Billion (my estimate) for a net revenue reduction of about $5 Billion (about 2.5%) an amount that could easily be overcome should the world’s economy pick up a tick or two over the next 11 months.

    However, that’s just C2019 results. Walkley is predicting 191 Million iPhone units sold during C2020. That’s a unit growth rate of 8%, and an iPhone revenue growth rate (adjusting ASP for the changes in iPhone lineup) of about 9.5%. Add Accessory and Services revenue growth and C2020 revenue grows YoY about 12%.

    That’s not nearly as scary as claiming a 13% reduction in unit sales for C2019. But if you’re wanting to be obtuse, continuing to report unit sales vs revenue generation it works just fine.

    0
    January 19, 2019

Leave a Reply