iPhone 8: Sales Likely To Grow, But Not The 'Super Cycle' Some Expect

“The market continues to be optimistic on iPhone sales this year based on the expected launch of a 10th anniversary iPhone and the belief that the installed base is ripe for an upgrade,” Deutsche Bank’s Sherri Scribner said in a note, while maintaining a Hold rating on Apple Inc. AAPL and raising the price target from $115 to $125.

Slowing Growth

The analyst continues to be cautious on Apple, however, given the slowing smartphone growth globally, as well as the elongating refresh cycle and expectations of the new models being high priced.

The Global iPhone supply chain report published on February 20 points to increased bill-of material costs and average selling prices (ASP) for the supply chain, although unit growth is likely to be only in the mid to high single digits.

The supply chain also indicates 5 percent half-on-half iPhone growth during calendar second-half 2017, with total iPhone production for the second half of 2017 expected at 134.5 million, up from the 128.5 million units in CH2:16.

“This would be a positive for iPhone units and the supply chain, after last year’s supply chain shipments were down 12 percent H/H,” Scribner mentioned.

Related Link: Apple's Chart Remains Bullish, Pro Explains

Not A “Super Cycle”

On the other hand, 5 percent half on half growth would be a meaningful deceleration from the previous years, when iPhone production increased over 20 percent year-on-year in the second half, suggesting that the iPhone 8 cycle would be “a far cry from what many are calling a ‘super cycle.’”

In addition, the price of the new iPhone models is expected to be high, driven by high-end components, with many among the supply chain speculating that the highest end iPhone 8 model could start possibly in the $900–$1,000 range.

The analyst believes that these high prices might help ASPs but would limit demand.