If you thought last quarter’s record Apple earnings were enough to prove the doubters wrong… well, you’d be wrong.
According to a familiar sounding note from Nomura Instinet analyst Jeffrey Kvaal, iPhone sales aren’t inspiring, and Apple could be in for a disappointing next 12 months.
“iPhone volumes are not deteriorating though iPhone X remains uninspiring,” Kvaal wrote today. “Apple guidance implied third fiscal-quarter iPhone unit volumes that were better than feared. We do not believe, however, sell through has meaningfully improved.”
One reason Kvaal is down on Apple is due to a decline in phone upgrades on the part of users, with the average U.S. upgrade rate at major U.S. carriers currently sitting at around 5.3 percent.
“We see little reason for [the upgrade rate] to improve in the near term,” he noted. “None of the carriers appear particularly distraught by the lower gross adds – and lower churn – that accompanies the lower upgrade rate. Verizon expects to remain disciplined and Sprint also expects to be less promotional.”
Betting against Apple?
Overall, he thinks that Apple will fall 6 percent from last week’s closing price to settle at around $175 over the next year. That’s a far cry from those expecting it to break the $1 trillion barrier!
Although Apple’s services division continues to grow, Kvaal isn’t convinced this will be enough to turn things around — and wants “better disclosure” from the company about how the services business breaks down. His verdict on this part of Apple’s business? “Good, not great.”
While Kvaal could certainly be correct, we can’t help but think that — especially after virtually everyone got things wrong last quarter — it’s not smart to bet against Apple right now. Personally, we’re more inclined to think along the lines of Warren Buffett, whose financial firm just became Apple’s third-biggest investor.
As of Friday, Apple’s stock price was $186.31, giving it a market cap of $915 billion. For those keeping track at home, that’s within $20 of making Apple the first $1 trillion company in history.
What are your predictions for Apple’s prosperity of the next year? Let us know in the comments below.
Source: CNBC
