Here’s why iPhone sales slowdown may be good for Apple

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Apple raked in the cash last quarter.
Do falling iPhone sales mean growing iPhone 8 excitement?
Photo: Jim Merithew/Cult of Mac

Apple reported weaker-than-expected iPhone sales during its earnings call yesterday. However, not every Apple watcher is convinced that’s bad news for the company.

In a note to clients, Mizuho Securities analysts Abhey Lamba and Parthiv Varadarajan suggest that the “pause” in sales is less likely to be about people losing interest in the iPhone — and more related to massive excitement over the forthcoming iPhone 8.

“We view this as a potentially positive sign as it can create significant pent-up demand for the new device once it launches,” they write. “We continue to expect a strong iPhone 8 cycle during the upcoming holiday season.”

As a result, they raised their their price target for AAPL from $150 to $160, and reiterated its “buy” rating.

This take on iPhone 8 demand being responsible for iPhone sales slowdown is related to what Tim Cook said during this week’s earnings call. Partially pinning the blame for the iPhone sales slump on rumormongers like yours truly, Cook said that people making a “pause in purchases” when it comes to iPhones is due to the more frequent reports about future handsets.

What the other analysts say

Pacific Crest analyst Andy Hargreaves and colleagues meanwhile agreed with the excitement “for upside to our gross profit expectations through the coming iPhone 8 cycle,” but noted that they, “anticipate a slowdown beyond that.”

Hargreaves also claimed that “tax reform that allows for increased financial engineering may be necessary to drive AAPL beyond our $150 price target.” Despite this, AAPL still carried an overweight “buy” rating.

Lastly, BC analyst Amit Daryanani and colleagues issued a note following Apple’s earnings announcement, suggesting that investors should “hit snooze for 90 days,” and that nothing much will happen until the launch of the next iPhone.

When exactly that will be remains to be seen, however. While analysts are fixated on September for the launch of the new iPhone, as has been the case in recent years, new reports have suggested the iPhone 8 could be delayed — even as late as 2018.

In the meantime, if you want to catch up on all the important surprises from yesterday’s earnings call, you can do so here!

Source: Marketwatch