Jun Zhang reiterates his Street-low $150 Apple price target

The Street’s fiercest Apple bear digs in his heels.

From “Weak Pre-Orders for the new iPhones,” a note to Rosenblatt Securities’ clients that landed on my desktop Friday:

Summary

Every year, we speak with several retailers and telecos surrounding pre-orders and sell- through data following the launch of the new iPhone. Below, we highlight our recent findings for the iPhone 11, Pro, and Max.

China

China’s telecos did not highlight the new iPhone 11 this year as they focused on promoting 5G smartphones instead. We found it very difficult to find China Mobile (CHL: NR), China Unicom (CHU: NR), and China Telecom’s (CHA: NR) pre-order webpage. In addition, the China telecos did not highlight pre-orders on their main webpage.

US and Other Regions

Although we believe this year Apple ramped production faster during the September quarter, we think iPhone 11 Pro and 11 Pro Max production may be 20-30% lower than initial production of the iPhone XS and Max. We think OEMs allocated more capacity for iPhone 11 production.

Therefore, there is no wait time today for the iPhone 11 Pro and Max, suggesting that initial sales of the two models could be 20-30% lower than iPhone XS and Max sales last year.

For the iPhone 11, we believe the best compare is to the iPhone XR. For the initial production ramp, we believe both models are at similar levels. The 1-2 week wait time last year for the iPhone XR suggests iPhone XR initial orders are higher than the iPhone 11 initial orders.

Maintains Sell rating and $150 price target. 

My take: Zhang’s “Risks” section makes it perfectly clear where Rosenblatt Securities has placed its bets.

Risks to our target price and target rating include stronger than expected iPhone sales, a more aggressive stock repurchase plan, better than expected gross margins, and stronger than expected services revenue leading to an acceleration in overall revenue growth.

I’ve never seen an analysts put his cards on the table like this.

17 Comments

  1. Dan Scropos said:

    The inability to find iPhone pre-orders on Chinese telecom web pages is the basis for buying or selling Apple? Wow, I’ve heard it all. This guy is a complete fraud. That is not an important data point. It’s actually not even a data point at all.

    2
    September 14, 2019
    • David Emery said:

      It seems to me that, -if- 5G is well established in China (either in fact, or in advertising 🙂 ), then concerns about the new iPhones lacking 5G might well be reasonable.

      It’s not “25% drop” reasonable, though.

      1
      September 14, 2019
  2. Gregg Thurman said:

    “Therefore, there is no wait time today for the iPhone 11 Pro and Max, suggesting that initial sales of the two models could be 20-30% lower than iPhone XS and Max sales last year.”

    “no wait time equals 20-30% lower sales” That’s a huge leap in logic and doesn’t square with “Although we believe this year Apple ramped production faster during the September quarter”

    This note is quality comic relief.

    2
    September 14, 2019
  3. Aaron Belich said:

    Still trying to count iPhones instead of AppleID’s…
    Tsk tsk.

    1
    September 14, 2019
  4. Robert Paul Leitao said:

    PED said, “I’ve never seen an analyst put his cards on the table like this.”

    What cards? In my view, he has a deck full of jokers. This would be funny but sadly for the analyst he’s not joking. He’s forecasting the success of this model year’s iPhones before they have been released and very early in the pre-order period.

    The reality is: Apple has entered the post-iPhone era. It’s not new handsets sales that matter by quarter or fiscal year but growth in the installed base of Apple product users and gradually diminishing the average age of the hundreds of millions of iPhone handsets in use around the world for the benefit of the consumption of services.

    Apple’s fortunes don’t rise and fall based on the number iPhone units sold in a quarter or fiscal year. Apple’s fortunes rise on the quality of the user experience. What’s important for this model year isn’t so much the number of handsets sold. It’s the compelling user experience as Apple releases its gaming service later this month and a streaming service in early November.

    All of the iPhone models announced this month will deliver a satisfying user experience with enhanced battery life. These handsets will be in use somewhere in the world for, on average, at least three years.

    The success of the iPhone franchise is measured in multi-year cycles and through the sales of associated services. How in the world does an analyst wishing to be taken seriously analyze the success of handsets that have been announced but not yet released and without any qualitative analysis of the impact of the new handsets on Apple’s Services revenue stream?

    8
    September 14, 2019
    • David Drinkwater said:

      Hi Robert.

      Do these two not somewhat contradict each-other?
      (My cut and paste is not cooperating, so this is conceptual, and not verbatim,)

      These handsets will be in use, somewhere in the world, for on average three years.

      and

      Gradually diminishing the ages of the hundreds of millions of iPhone handsets in use around the world.

      0
      September 15, 2019
      • Robert Paul Leitao said:

        David:

        The two statements are not contradictory. Depending on the geographic region, iPhones remain in service, on average, for as long as four years. Newer handsets tend to deliver higher services attachment rates.

        Apple can’t change overnight how long iPhones remain in service. What Apple can do is deliver the most advanced handsets possible that are capable of handling the delivery of rich and robust services while the company enhances the value proposition of the iPhone line which over time will lead to greater demand for newer handsets and gradually diminish how long, on average, an iPhone remains in active use.

        It’s not bad news that iPhones have an extended service life. It expands the global user base and creates a robust market for pre-owned iPhones through both formal and informal channels. This is among the reasons the global base of iPhone users is continuing to grow at double-digit rates even if the pace of new iPhone sales is highly cyclical. However, in general, the older the handset (often in use by a second or third owner) the lower the rate of services attachment.

        0
        September 15, 2019
        • David Drinkwater said:

          “It’s not bad news that iPhones have an extended service life. It expands the global user base and creates a robust market for pre-owned iPhones through both formal and informal channels. This is among the reasons the global base of iPhone users is continuing to grow at double-digit rates even if the pace of new iPhone sales is highly cyclical. However, in general, the older the handset (often in use by a second or third owner) the lower the rate of services attachment.”

          I completely agree with this from top to bottom. I think users of old iPhones will be sucked in by the low cost of a preloved iPhone and then will wish to have the advantages of a more modern iPhone. So one can hope that that eventually predicates higher levels of service attachment.

          That said, I think there’s gonna be something like a “Boomer” phenomenon with iPhones, so we’ll see something akin to Boomers, and Gen-X and Millennials …..

          In general, I believe the long-term trends will be positive.

          0
          September 16, 2019
  5. James Dean said:

    F Him, I has life, and a boat load of AAPL, amongst thirty other symbols. Idiot.

    I lost another brother yesterday, 2nd triplet to leave these golden bonds of earth. And a 28 year old woman I took photos of on her birth event. I loved her dearly, for 28 years. Boom, gun to the head, now dead! Crying here, tears…

    You think you have issues with what an AAPL analyst has to say, fed them, and all their ilk!

    Life happens, and mine is most difficult right now, sigh.

    Cheers to Lucky and the longs.

    Pfft, god? What god?

    0
    September 15, 2019
  6. Kirk DeBernardi said:

    Peace be with you, Mr. Dean. Stay strong as life throws it’s stones.

    0
    September 15, 2019
  7. Dan Scropos said:

    China’s Tmall already has one million iPhone 11 series preorders

    “As the only third-party online store besides Apple’s official mall, Tmall Apple’s flagship store has become an important point for the new iPhones. According to Tmall official data, there are currently over 1 million interests to reserve the iPhone 11 series.

    Most of the interest reservations go for the iPhone 11 which is the cheapest in the series. From Tmall’s data, the booking volume is 200% that of iPhone XR.”

    0
    September 15, 2019
    • Gregg Thurman said:

      But, but, that can’t be. Zhang says pre-orders are lagging.

      Stupid is as stupid does. Zhang does, does that make him stupid?

      Zhang reminds me of an old saying, “better to keep your mouth shut and have people think you stupid, than to open it and prove it”.

      I think we can remove Zhang from the credible (not even remotely) list, along with Rod Hall. Any objections?

      1
      September 15, 2019

Leave a Reply