Goldman Sachs: Apple’s iPhone sales this year will disappoint, causing stock decline

Goldman Sachs underscored its lukewarm thesis on Apple and said it believes the company
will ship fewer iPhones in late 2019 than the 67 million the rest of Wall
Street expects.

Analyst Rod Hall reiterated his neutral rating Tuesday, telling
clients that it’s increasingly likely that Apple falls short of unit sales and
average selling price estimates later this year.
We believe consensus is assuming a steep recovery in China, with
little change in demand trajectory for other [geographies],” Hall told clients
in a note. “We note that iPhone shipments in the U.S. and Japan cycled up in
CY18 [calendar year 2018], with U.S. shipments growing 8% year over year in
CY18.”
A better consumer environment for the most part of 2018 combinedwith compelling products later in the year helped drive iPhone growth in theseregions,” he added. “For CY19, however, we note that U.S. consumer sentiment is
down year over year and an end to subsidies in Japan could create volatility.”
Apple shares were slightly higher in premarket trading Wednesday.
The equity is up more than 27% over the last 12 months to $207.48 a share
through Tuesday.
Goldman Sachs increased its price target on Apple to $182 on
Wednesday, which still represents a 12% decline from here.
Apple has in recent years incorporated more luxurious features inits phone production, hoping to combat a decelerating replacement cycle with a
higher average selling price (ASP). New generations include facial recognition
and wireless charging, more storage capacity and larger screens.
The tactic has had mixed success across the globe. iPhone
shipments in France, the United Kingdom and Spain declined 12%, 11% and 3%,
respectively, in 2018 despite the deluxe offerings. Units fell 23% year over
year in China over the same period, including a 44% year-over-year decline in
the fourth quarter, Goldman’s Hall added.
“It is too early to assume a recovery on units in China to
pre-2018 levels given increasing local brand traction and ongoing consumer
weakness that may suggest a “new normal” level of demand for the country,” Hall
wrote.
The analyst estimates 61 million iPhone sales in the December 2019quarter, 8% below FactSet consensus. His average selling price estimate for
fourth-quarter 2019 is $806, or 4% above consensus.