CLSA Cuts Apple iPhone Estimates, Blames China

CLSA’s Avi Silver maintained a Buy rating for Apple Inc. (NASDAQ: AAPL), while reducing the price target from $130 to $128, citing lower growth forecasts for smartphones in 2016-2017.

Analyst Avi Silver mentioned that a reduction in smartphone model unit estimates, a shift in the timing of the Apple Watch 2.0 launch to the back half of the year and a slower uptake of the Watch indicate lower estimates for Apple. A richer ASP margin in the 7 Cycle, however, partially offsets the negative impact of these factors.

Apple is expected to post June quarter revenues of $45 billion, despite the launch of a new lower priced iPhone.

Reduced Growth Forecasts For Smartphones

The growth forecasts for smartphones in 2016 and 2017 have been reduced from 10.6 percent to 8.6 percent and from 9.9 percent to 6.7 percent, respectively. The change is largely attributable to Asia, including China and other emerging markets, which are expected to witness lower sales of branded smart phone units.

“Slower growth in Asia and FX headwinds contribute to longer replacement and softer smart phone adoption rates in emerging markets,” Silver stated.

The iPhone unit estimates for FY16 and FY17 have been reduced from 217 million units to 214.8 million units and from 237.6 million units to 230.6 million units, respectively, to reflect weakness in flagship models, partially offset by increased volume of lower-end models.