Checks Indicate Apple iPhone 7 Sales Weaker Than iPhone 6, UBS Sees Tepid China Demand

Until Apple Inc. AAPL officially reports Q3 earnings on October 25, traders are left to obsess over any possible indication of how iPhone 7 sales are trending. A new report by UBS analyst Steven Milunovich indicates that the iPhone 7 may not be selling as well in China as Apple bulls had hoped.

UBS recently hosted a conference call with Asia telecom analyst Jinjin Wang, who was particularly cautious about the iPhone 7.

Milunovich notes that the greater China market represents about 25 percent of Apple’s revenue, much of it at relatively high-margins. However, Jinjin reports that Apple has been losing market share to domestic Chinese brands like OPPO, Vivo and Huawei.

Chinese distributor checks reveal that the iPhone 7 sales have lagged iPhone 6s sales up to this point.

“High-end phone penetration is 80-90%, and perceived lack of innovation for the 7 has made users hesitate to upgrade,” Milunovich adds.

Related Link: Channel Checks Still Show Limited Supply Of iPhone 7

iPhone subsidies have finally stabilized in China after falling 30 percent in 2014 and 40 percent in 2015.

One bright note for Apple investors is that Jinjin has observed that the higher-margin iPhone 7 Plus seems to be out-selling the base model.

Despite the disappointing news out of China, UBS maintains a Buy rating on Apple and a $127 price target for the stock.