Apple (AAPL): Survey Data Exposes Sluggish Sales

Though Canaccord's Michael Walkley watches out for weakening iPhone sales until new iPhone products launch, he remains positive sales can step up in the back half of the year.


Apple Inc. (NASDAQ:AAPL) iPhone sales may be losing steam- at least until September sees a refresh in product launches, wagers one of Wall Street’s best performing analysts, Canaccord’s Michael Walkley. Survey work in North America as well as chats with industry contacts suggest this loss in iPhone sales momentum is primed to continue through the new products launch, Walkley explains.

Though the fourth quarter initially showcased steady iPhone X demand in both the U.S. as well as in China, Walkley keeps an eye out for softer trends in the first half of 2018 in both regions. Walkley’s theory: the more expensive price tag on the iPhone X led demand to be somewhat more limited. That $1,000 plus price point may have proved to be loftier for the “broad market appeal” than the AAPL machine expected. Mark Walkley’s prediction- this tech titan is set to scale back its channel inventory this summer.

“We anticipate Apple will clear channel inventory ahead of releasing three new iPhones in September 2018 to further segment its product offering based on price/features. […] In China, we believe the 5.8-inch iPhone X screen size is not large enough for the high-end segment of this market. In fact, a variety of smartphones from Chinese OEMs with similar or larger screen sizes were already available prior to iPhone X. In addition, new Android smartphone offerings have increased competition in China and other markets, likely contributing to slower near-term iPhone sales. Despite these challenges, we believe iPhone X sales have maintained strong share of the U.S. market, and we do not believe Apple consumers are leaving the Apple ecosystem for competing Android smartphones,” explains Walkley.

In reaction, the analyst is scaling back his second and third quarter iPhone expectations. For the second quarter, the analyst is cutting his iPhone estimate from 53.1 million to 48.0 million and for the third quarter the analyst scales back his iPhone forecast from 43.7 million to 39.4 million. Additionally, Walkley reduces his full year 2018 iPhone projection from 226 million to 210 million as well as his 2019 iPhone estimate from 231 million to 217 million.

That said, the analyst remains impressed with the tech empire’s growth of its market share leadership in the smartphone arena and reiterates a Buy rating on AAPL stock with a $200 price target. This notably implies a healthy 20% upside from current levels. Walkley continues to angle for the company’s monster iPhone installed base surpassing 635 million last year to yield robust iPhone replacement sales and earnings- and cash flow generation to fuel solid long-term capital returns.

With a fall launch of a bigger iPhone X Plus model coupled with a more cost-friendly full-screen LCD iPhone soon to be on the table, the analyst looks for better reception in the market. Walkley is reassured considering demand clamors for bigger screen sizes and consumers will be glad to get their hands on “a smartphone at the iPhone 8 price point.” Therefore, in the grander scheme, the analyst notes, “We remain optimistic iPhone sales will improve in 2H/C2018.”

Michael Walkley has a very good TipRanks score with a 62% success rate and a high ranking in the top #100 on Wall Street: an impressive #73 out of 4,783 analysts. Walkley garners 17.7% in his annual returns. When recommending AAPL, Walkley realizes 26.2% in his annual returns.

TipRanks indicates this tech titan has drawn largely positive attention from Wall Street analysts. Out of 28 analysts polled in the last 3 months, 17 are bullish on AAPL stock while 11 remain sidelined. With a return potential of 16%, the stock’s consensus target price stands at $192.88.

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