From a note to clients by analyst Daniel Ives that landed on my desktop Thursday:
Our Asia checks continue to give us confidence based on supply chain tea leaves that Cupertino is in the process of producing between 75 million to potentially 80 million iPhone 11 units heading into the September launch period. This is roughly in line with the year ago period and speaks to our thesis that despite the myriad of China challenges and macro swirls, Apple is seeing stable demand and still feeling confident…
From an overall unit perspective, we believe Apple is on a trajectory to sell between 180 million to 185 million iPhone units in FY20 with relatively stable ASPs on the heels of moderating iPhone headwinds, despite many of our peers yelling fire in a crowded theater. In China specifically around demand, while the environment remains complex for Apple to navigate, thus far we have NOT seen many cracks in the armor…
The installed base of Apple remains the golden jewel and key to the valuation and our bullish thesis, as with 900 million active iPhones worldwide and roughly 1/3 of those poised to be in the window of an upgrade over the next 12 to 18 months.
Maintains Outperform rating and $245 price target.
My take: This is Ives’ standard bullish case. His note also offers a bear case:
The temporary US/China ceasefire is reversed, tariffs are ultimately placed on the iPhone and throw a large wrench into the iPhone product cycle; China demand doldrums remain into FY20.