Analysts Slash iPhone Estimates As The Smartphone Market Slows

Does Apple Inc. AAPL have an iPhone problem?

The Analysts

Rosenblatt Securities' Jun Zhang maintains a Buy rating on Apple's stock with an unchanged $180 price target.

Goldman Sachs' Rod Hall maintains a Neutral rating on Apple's stock with a 12-month price target lowered from $161 to $159.

The Thesis

Apple's iPhone X is nearing the end of its life cycle, despite being in the market for less than one year, Rosenblatt's Zhang said in a Wednesday report. Accordingly, the firm its iPhone production forecast for the second quarter — beginning in April — from 2.5 million monthly units to a new range of 1-1.5 million monthly units. The revised estimate implies Apple's total second quarter iPhone production will fall from 38 million to 36 million.

Goldman Sachs also lowered its iPhone sales estimates, but for the first two quarters of 2018. The firm is now modeling Apple's total iPhone sales for the quarter ending March 31 at 53 million units, down from a prior estimate of 54.7 million units, analyst Hall said in a Tuesday note.

For the second calendar quarter, Goldman's iPhone sales estimate was slashed from 43.5 million to 40.3 million units.

Demand for iPhones was "already weak," but demand indications imply Apple's sales figures for the two quarters will come in lower than what the Street is expecting, Hall said. Accordingly, Apple will need to address a "material channel inventory" ahead of the launch of new products in the fall season, he said. This could also result in a lower than expected average selling price in the June quarter.

Goldman lowered its full-year revenue estimate by 2.4 percent to $256.6 billion and lowered its 2019 revenue estimate by 2.7 percent to $272.5 billion.

Price Action

Shares of Apple were trading lower by 1 percent at $166.62 Wednesday morning.

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Photo courtesy of Apple.