Analyst Cuts iPhone Estimates Ahead Of Apple's Q1 Report

Stifel’s Aaron C. Rakers stated that the “analysis of the various highly correlated monthly iPhone data points” tracked through the quarter indicate an implied iPhone sell-thru in the low-70 million range for 2017's fiscal first quarter.

Rakers maintains a Hold rating on Apple Inc. AAPL, with a price target of $115.

Estimates Cut

Based on an analysis of iPhone demand data points over the past three months, the revenue estimate for FQ1:17 has been lowered from $76.7 billion to $76.0 billion, while the EPS estimate has been reduced from $3.23 to $3.16, with both estimates now below the consensus.

The estimates reflect iPhone shipments of 73.4 million, a decline from the prior estimate of 76.7 million.

“We also reduce our F2Q17 and F3Q17 estimates to reflect flat y/y iPhone ship trends, which does reflect easing compares; however, we slightly increase our F2018 and F2019 estimates on increased iPhone 8 cycle optimism,” Rakers mentioned.

iPhone 8 Expectations

The analyst expects Apple to provide initial production estimate for the iPhone 8 in July-August, and stated that an estimate of 90 million should be considered positive, given that historical figures and Street models suggest a range of 80–85 million.

While investors now expect a high-end AMOLED display for the iPhone 8, Rakers believes that “Apple's possible integration of 3D sensing in the next-gen iPhones could be considered a killer app and provide renewed confidence in Apple's innovation engine.”

The analyst estimated the iPhone installed base at 700 million, and a 30 percent pre-iPhone 8 installed base upgrade would equate to 210 million iPhones or 70 percent of the total iPhone shipment estimate for December 2017-December 2018.