US tech giant Apple Inc would not be able to meet up with expectations of the Wall Street in terms of its iPhone shipments in late 2019, said Goldman Sachs in a report. The market expects that the iPhone maker would ship about 67 million units in 2019.
His neutral rating of Apple stocks was reiterated by analyst Rod Hall and advised clients that the likelihood of Apple falling short of unit sales was well as in the average selling price estimates for the later part of the current year is quite high.
“We believe consensus is assuming a steep recovery in China, with little change in demand trajectory for other [geographies],” Hall told clients in a note. “We note that iPhone shipments in the U.S. and Japan cycled up in CY18 [calendar year 2018], with U.S. shipments growing 8% year over year in CY18.”
“A better consumer environment for the most part of 2018 combined with compelling products later in the year helped drive iPhone growth in these regions,” he added. “For CY19, however, we note that U.S. consumer sentiment is down year over year and an end to subsidies in Japan could create volatility.”
Apple shares were slightly higher in premarket trading Wednesday. Over the last 12 months till Thursday, the stocks of the company are up more than 27 per cent at $207.48 a share. On Wednesday, the price target on Apple was increased by Goldman Sachs to $182 which still is a 12 per cent drop from the high.
Greater luxurious features in its phone production have been incorporated by Apple in recent years which, it hopes would help the company to counter the slowing down of the replacement cycle of its iPhones with a higher average selling price (ASP). Greater storage capacity, larger screens, facial recognition and wireless charging are part of those new features.
There has been a mixed outcome of the strategy throughout the world. In 2018, despite the deluxe offerings, there was decline of 12 per cent, 11 per cent and 3 per cent in the shipment of iPhones in France, the United Kingdom and Spain respectively. And in the same period, there was a drop of 23 per cent in shipment in units in China which, Goldman’s Hall, is inclusive of a fourth quarter drop of 44 per cent year-on-year.
“It is too early to assume a recovery on units in China to pre-2018 levels given increasing local brand traction and ongoing consumer weakness that may suggest a “new normal” level of demand for the country,” Hall wrote.
In the December 2019 quarter, iPhone sales would be about 61 billion, estimates the analyst, which is 8 per cent lower than the FactSet consensus. His average selling price estimate for fourth-quarter 2019 is $806, or 4% above consensus
(Adapted from CNBC.com)