A Goldman Sachs analyst thinks Apple’s revised earnings guidance might be the start of a longer-term story. According to Rod Hall, Apple could slash numbers even further later in the year, due to lowered expectations about iPhone sales.
Hall goes on to liken Apple to Nokia, a fallen giant in the mobile game. The company ruled the market early on, only to run into problems.
Hall notes that Nokia became reliant on customer upgrades after saturating the market with its phones. Things backfired when customers began waiting longer and longer to upgrade their handsets. In Tim Cook’s recent letter about earnings guidance, he wrote that Apple faces problems getting users to upgrade to the latest iPhone.
“Nokia saw rapid expansion of replacement rates in late 2007 that was well beyond what any linear forecast would have implied,” Hall wrote. “Beyond China, we don’t see strong evidence of a consumer slowdown heading into 2019, but we just flag to investors that we believe Apple’s replacement rates are likely much more sensitive to the macro now that the company is approaching maximum market penetration for the iPhone.”
He continued: “We see the potential for further downside to FY19 numbers depending on the trajectory of Chinese demand in early 2019. We have been flagging China demand issues since late September and Apple’s guidance cut confirms our view. We do not expect the situation to get better in March and would remain cautious on the region.”
Hall lowered his stock forecast on Apple from $182 down to just $140. At present, AAPL is trading at $143.93. This is the lowest Apple has been valued at since April 2017.
Personally, I think the comparison with Nokia is interesting — but definitely a bit premature. Among other differences, the Nokia handsets which were so insanely popular in the early 2000s and late 1990s were overtaken by the smartphone. The same thing hasn’t happened with Apple. Beyond that, a slight dip in iPhone sales, for reasons as much related to external issues, as anything else isn’t reason to panic. Now if the same thing happens every quarter for the rest of 2019…
Source: CNBC
