Another Apple Analyst Warns Of Soft iPhone, Overall Smartphone Demand

Canaccord Genuity's surveys are pointing to soft smartphone demand, including for tech giant Apple Inc. AAPL's iPhone. 

The Analyst

Analyst T. Michael Walkley reiterated a Buy rating on Apple and lowered the price target from $250 to $225.

The Thesis

Canaccord's recent surveys took unit sales across a broad range of products into consideration. Apple has maintained a strong share of smartphone sales at four major carriers, Walkley said in a Wednesday note. (See his track record here.) 

“Despite slowing iPhone sales, we still anticipate Apple will continue to grow its install base and believe the ecosystem will contribute to strong ongoing growth, particularly for higher-margin Services and other products.”

Apple’s iPhone installed base should exceed 700 million in 2018 on the basis of its ability to expand market share, the analyst said. Overall, recent surveys indicate soft demand for the iPhone XR, despite the high expectations surrounding the reduced price, he said. 

“Feedback for lackluster initial sales included its inferior quality perception given its aluminum construction versus the XS and XS Max, lack of HD screen and viable lower-cost alternatives in the older iPhone X and 8 models," Walkley said. "T-Mobile Us Inc TMUS appeared to have stronger XR sales trends than the other three carriers.”

Canaccord anticipates that strong long-term ecosystem growth will drive Apple's revenue streams.

Cupertino will likely sustain strong Services revenue growth aided by the App Store, subscriber growth, Apple Care and Apple Pay, Walkley said. 

“In addition, we believe Apple is developing additional services such as video content that could lead to new areas of growth. Further, our survey work indicates strong performance of wearables continuing the strong momentum coming out of Q4 earnings, and we increase our growth rates from mid-single-digits to double-digits for the Other Products segment.”

Price Action

Apple shares were down 1.23 percent at $178.71 at the time of publication Thursday. 

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Photo courtesy of Apple.