Canaccord Lowers iPhone Expectations on Weaker Projections

Canaccord Genuity lowers AAPL target price on reduced iPhone demandCanaccord Genuity analyst Michael Walkley lowered his 2013 and 2014 iPhone and iPad sales expectations on Monday citing expected lower demand for Apple's mobile devices and reductions in parts orders. He also thinks Apple may be ramping up for a new iPhone launch sometime around June 2013.

“While our November channel checks indicated very strong sales of the iPhone 5, we are slightly lowering our fiscal 2013 and fiscal 2014 iPhone and iPad due to softer sales expectations in international markets, primarily in Europe,” Mr. Walkley said. “While order reductions to iPhone suppliers are not unusual this time of year, we believe reduced iPhone 5 orders for the March quarter could also indicate an earlier launch of new iPhone products in the June quarter.”

His lowered expectation for Apple's iPhone and iPad performance came as the Cupertino-based company reported selling over 2 million iPhone 5 units in China during its launch weekend. In comparison, Apple sold over 5 million units across several countries during the initial iPhone 5 rollout in September.

Mr. Walkley said he expects lower international sales will have the biggest impact on the number of iPhones and iPads Apple moves, and added that “our checks indicate the iPad Mini might be cannibalizing iPad sales more than our initial expectations, resulting in a greater mix of lower-ASP iPad mini sales in our revised estimates,” which will also have an impact on Apple's bottom line.

Assuming Apple is planning a June quarter launch for its next iPhone model, Mr. Walkley thinks the company may follow up with a summer launch for a lower priced iPhone for pre-paid international markets.

“With our belief Apple is starting to use larger distributors to help increase iPhone sales in international markets the past two quarters, we believe Apple is in the early stages of testing pre-paid oriented international channels for potential future iPhone launches,” he said. “In fact, we believe Apple can generate strong iPhone sales growth in large under penetrated markets such as Eastern Europe, Latin America, and Southeast Asia over the next several years.”

Even though Apple may be eating into its higher priced iPad sales with the iPad mini, Mr. Walkley still sees a positive future for Apple's bottom line. Apple is in a good market position with what he called a strong multi-year product cycle and the potential for the fabled Apple television.

Mr. Walkley is maintaining his “Buy” rating, but lowering his target price from US$800 to $750 for Apple's stock. Apple is currently trading at $503.46, down 6.33 (1.24%).

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

WIN an iPhone 16 Pro Max!