iPhone sales could ‘get worse’ before they get better

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iPhone
Yet another analyst thinks iPhone sales are going to struggle in 2019.
Photo: Apple

Jefferies analyst Timothy O’Shea has added his name to the growing number of Apple watchers concerned about iPhone demand. His message? That Wall Street estimates remain too high, and that Apple’s situation, “could get worse before it gets better.”

Apple has lost more than one-fifth of its value since its $1 trillion record market cap earlier this year.

Jefferies expects Apple to sell 206 million iPhones next year, with a projected 72 million sales in the first quarter of the year. That is less than Wall Street expectations of around 210 million iPhones for 2019 and 74 million units in Q1.

As noted, Timothy O’Shea is far from the only Apple watcher concerned about falling iPhone sales. Respected Apple analyst Ming-Chi Kuo, along with analysts for Citibank and HSBC, have all voice concerns about supposedly struggling iPhone demand.

Apple has not released any figures to counter this, although a senior executive did point out that the iPhone XR (the handset that is reported to be faring particularly badly next to expectations) is currently Apple’s best-selling model.

Services to the rescue

Nonetheless, Timothy O’Shea’s view on Apple isn’t totally pessimistic. While he lowed his price target from $265 a share to $225, O’She thinks that Apple’s Services division can make up some of the shortfall.

“Apple’s iPhone business still looks sufficient to build a massive, high margin, high multiple Services business over time,” O’Shea wrote in his note to clients. “Apple will disclose gross margin of Services for the first time ever next earnings.”

Not everyone is quite so optimistic, however. Macquarie Research analyst Benjamin Schachter recently laid out his reasons why he thinks Apple’s Services division is about to slow down. These include problems in China, and a fall in hardware sales hurting revenue streams like Apple Care.

Who will turn out to be right? We’ll have to wait and see. Who knows: Maybe it will be like last year and analysts everywhere will have to eat crow over iPhone figures when it turns out that Apple sold way more handsets than expected.

Source: CNBC