Apple Inc (NASDAQ:AAPL) is set to post its second-quarter earnings on Tuesday and if the analysts are right, the results could be a bit of a bloodbath for iPhone sales.
The iPhone X – Apple’s tenth anniversary smartphone – was supposed to be the best yet, but it seems the public has been less-than-impressed by the phone’s features and, more likely, its hefty price tag.
In a note obtained by TheFly.com, Bernstein analyst A.M. Sacconaghi Jr highlights the “striking” similarities between the current iPhone X and 8 cycle and the iPhone 6s cycle – another difficult period for phone sales.
READ: Samsung warns of weak demand for OLEDs used for Apple’s iPhone X
Going into its second-quarter earnings, Sacconaghi reckons the risk-reward is, at best, neutral, while he continues to believe that estimates are more likely to go down than up in the near-term.
READ: Apple supplier Teradyne reports sharp drop in demand
The analyst – who has the stock as a "Perform" with a price target of US$170 – points out that Apple’s expected large capital return programme could mitigate this, but still sees the post-earnings narrative being dominated by questions over the iPhone.
Saggonachi isn’t the only one predicting a slowdown in phone sales. Barclays’ number cruncher Mark Moskowitz has cut his price target to US$157 from US$168 on concerns that a “weaker iPhone franchise” could require the company to go out and make a few acquisitions.
He cut his estimates for the second time in as many months, claiming that Apple investors are in the stock for capital returns from its US$200mln+ cash pile.
If that cash is used elsewhere, Moskowitz – who has Apple as Equal Weight – says it could be a “sell on the news event” should the capital returns to shareholders be merely in line with forecasts.
Apple to lower forecasts?
BMO Capital analyst Tim Long thinks the tech giant could even lower its projections in the earnings call on Tuesday.
Long kept his "Market Perform" rating and US$166 target price in play but dropped his full-year earnings per share estimate to US$10.55 from US$11.16.
In a note to clients obtained by TheFly.com, Long believes that iPhone sales have struggled this time around because the higher price means people are waiting longer to upgrade their smartphones.
The analyst isn’t convinced that the new phone, due in September, will immediately solve the iPhone’s issues although he does expect the company to announce a new shareholder return programme which could pacify investors for a while longer.
As for what to expect in Tuesday’s second-quarter results, the Wall Street consensus is for earnings of US$2.69 on revenue of US$61.1bn.
Apple shares rose 1.8% on Monday and were up another 0.1% to US$165.41 in after-hours trading.