Maintaining A Cautious View On Apple Ahead Of Q1 Results

“With great anticipation for enhanced displays, newer casings, wireless charging, multiple dual-camera SKUs, and an additional footprint, demand for iPhone 8 does not appear to be the issue, rather minimizing inventory exposure is the name of the game as we navigate through 2017,” BlueFin’s John Donovan said in a note, while maintaining a Cautious stance on Apple Inc. AAPL.

Q1 Expectations

Following the 10 percent reduction in December 2016, Apple has cut the first-quarter of calendar year 2017 iPhone builds guidance by another 5–6 percent, and Donovan mentioned that Apple supply chain updates continue to suggest that early 2017 would be marked by persisting uncertainty and build cuts.

However, the CQ4:16 iPhone build guidance of 80 million has been left unchanged, while the shipment estimate has also been maintained at 77 million.

Estimates Cut

The analyst noted that “while March quarter builds are now down 38 percent sequentially, the magnitude of the 1H:17 aggregated cuts is far less than the massive cuts in 1H:16, when inventories stockpiled.”

The Q1 units estimate has been left unchanged at 46 million, below the consensus expectation of 50 million.

“As we track both build and component order patterns, our thesis that the 59 million Q1:17 build projection was too high has played out,” Donovan stated.

The CY 2017 iPhone builds estimate has also been lowered by 11 million to 229 million, given the uncertainty surrounding next-gen phones.