iPhone Supercycle Unlikely This Year, Strong Sales Expected Anyway
The upcoming iPhone generation launching in September is unlikely to generate a supercycle, but on the other hand, the trio should contribute to strong sales for Apple.
This is what Citigroup analyst Jim Suva recently said in a note to clients, explaining that iPhone is expected to post single-digit growth this year.
Apple is projected to launch three different iPhone models this year, one of which would be equipped with an LCD panel specifically to sell at a lower price. According to previous analyst forecasts, the device could hit the market at a price range of approximately $700. It may lack features like a dual-camera system and 3D Touch.
“While iPhone X demand expectations have been tempered, we believe 2H18 lineup could spur demand given the differentiation in the higher end OLED models versus the LCD models and consumers becoming accustomed to paying a premium price for smartphones which are essential to daily life. We are not expecting a Super Cycle but we do believe sustainable single-digit unit growth of iPhone is achievable,” the analyst explained.
Share price declining
While the iPhone would remain Apple’s flagship product, the Services unit would become a key catalyst of the company’s growth in the short term.
“Apple Services in total represent about 15 percent of total company sales and is the second largest contributor to margin dollars. We note Apple’s internal goal is to double Service revenues from fiscal year 2016 to fiscal year 2020 seems reasonable,” Suva noted.
The analyst set a price target for Apple stock of $200 despite the 2.7 percent decline that it recorded last month. Apple shares have increased mostly thanks to strong iPhone X sales in the first quarter, but demand is now declining, especially in anticipation of the new models launching in September.
Apple is projected to be one of the first tech companies to reach $1 trillion market cap, and the Services unit and iPhone are said to be the main engines powering this growth.
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