Apple (AAPL) iPhone Expectations May be Too Optimistic, Says Deutsche Bank
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Deutsche Bank maintained a Hold rating on Apple (NASDAQ: AAPL) and raised its price target to $125.00 (from $115.00). Analyst Sherri Scribner warned that iPhone expectations may be too optimistic, as its high price may pressure units.
"The market continues to be optimistic on iPhone sales this year based on the expected launch of a 10th anniversary iPhone and the belief that the installed base is ripe for an upgrade. We remain more cautious, given slowing global smartphone growth, elongating refresh cycles, and the expected high price of new models," said Scribner.
The analyst continued, "As highlighted in today's Global iPhone supply chain report 'iPhone 8, too good to be true?' new features point to higher bill-of-material costs and ASPs for the supply chain, but unit growth will likely only be in the mid to-high single digits. We are raising our PT on higher market multiples but given the recent runup in the shares, we see current valuation as fair."
Discussing the phone's price, the analyst said, "While we still do not know the price of the new iPhone models, due to highend components, many in the supply chain are speculating that the highest end model, the iPhone 8, will start somewhere in the $900-$1,000 range. We continue to believe that these high prices will limit demand. The $700 ASP and above segment of the smartphone market represented just 10% of total units in 2016 and declined 19% Y/Y. Of the 145M units that shipped in this price band in 2016, Apple represented more than 80%. Clearly, Apple is doing well selling high-end phones, and this should benefit their ASPs in 2017, but the vast majority of consumers can not afford to pay $1,000 for a new phone, as evidenced by the market’s average selling price (ASP) of $303 in C4Q-16."
Shares of Apple closed at $135.72 yesterday.
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