KeyBanc Survey Shows 'Disappointing' iPhone Cycle

Apple Inc. AAPL and its suppliers have been in a turbulent period since the technology giant introduced three of its latest iPhones in 2018. An analyst at KeyBanc Capital Markets delved into what ails the iPhone Tuesday. 

The Analyst

Analyst John Vinh has a Overweight rating on Broadcom Inc AVGO with a $270 price target.

The analyst is Sector-Weighted on the rest of the Apple suppliers in his coverage universe, namely Cirrus Logic, Inc. CRUS, Skyworks Solutions Inc SWKS, Qorvo Inc QRVO and Synaptics, Incorporated SYNA.

The Thesis

Demand for both the iPhone XR and XS/Max has been increasingly disappointing, Vinh said in a Tuesday note, citing KeyBanc's latest carrier survey across North America and Western Europe.

This has led to a sharp increase in carrier store inventories month-over-month, with stockpiles at over four days of inventory, suggesting "this could be one of the most disappointing cycle since the iPhone 6s," the analyst said. 

The trend stands in contrast to the firm's previous survey, which showed relatively stable XS demand. Vinh is of the view that early adopter buyers of higher-priced iPhones may have been exhausted.

"Consistent feedback from carrier store surveys indicated the current iPhone XR/XS cycle has been weaker than last year's iPhone 8/X cycle." 

The analyst noted limited promotional activity, with AT&T Inc. T offering buy one, get one free for only a few days around Christmas.

Samsung Electronics Co Ltd SSNLF's Galaxy S9 and Note 9 demand, though muted, remained largely stable without deteriorating, Vinh said. Sell-through declined only modestly month-over-month in December, but inventories fell more meaningfully as some stores received fewer shipments, he added.

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Photo courtesy of Apple.