maandag 12 juni 2017

AAPL Loses $50BN In Market Cap As Citi Piles On: Cuts EPS, iPhone Sales Forecast

The Apple pile up continues. After Mizuho downgraded and cut its price target on Apple overnight, following in the footsteps of Pacific Crest from a week ago, we said that "after last Friday's tech sector drubbing we expect more such downgrades in the days to come" and we did not have long to wait: shortly after Citi's Jim Suva also said that he is lowering his September estimates for iPhone units, total revenues and EPS. Specifically, Citi has cut September iPhone unit estimates to 40 mln while December unit estimates increased to 89 mln. This compares with consensus at 47 mln and 83 mln respectively. For FY2017, Citi’s iPhone units and ASPs at 208 mln/$664 vs. consensus at 217mln/$658. This drives Citi's FY17 EPS estimates to $8.55 (vs $9.00 prior) and consensus at $8.94.
However, the bank was not yet ready to go cold-turkey bearish on Apple, and as a result it compensated for the near term weakness by raising FY2018 projections. For FY2018, Citi estimates iPhone units/ASPs at 244 mln/$740 (OLED at 53% of total mix) vs. consensus at 242mln/$680. This drives the bank's 2018 EPS to $10.92 (from $10.60 prior) vs consensus at $10.53. The reason for Citi's cautiousness, "based on industry-wide checks, we believe the significant enhancements to the iPhone 8 OLED could experience delays as it ramps to high volume production in order to meet strong demand." 
# Some more from Citi: Launch of iPhone 8 and key features: We do expect Apple to launch its iPhone 8 in September and inside this report we detail the key features. Given the 10 year anniversary, impressive features and longer replacement cycle of the installed base, we believe many consumers will desire the OLED version of the iPhone 8 which we do not believe will be available in material quantities until October and November (rather than September). We believe consensus is too optimistic for volumes in the September quarter. We believe the OLED in-screen fingerprint sensor is more difficult to mass produce with high yields thereby making October/November mass availability likely, rather than September...

# How Citi's model changes as a result of the slower iPhone sales pickup assumptions:
*Every 1 million change in iPhone units' impacts quarterly EPS by ~$0.04
*Every 1 million change in iPhone SE units' impacts quarterly EPS by ~$0.015...


We believe our existing iPhone unit assumptions remain reasonable given the lengthening smartphone replacement cycle and competitive dynamics. We assume 500 mln iOS install base pre the iPhone 8 launch and replacement rate of 32 months. Our estimates imply non iOS subscriber switch rate of ~5%, vs 10% implied during the 24 months post the iPhone 6 launch...


We believe our existing iPhone unit assumptions remain reasonable given the lengthening smartphone replacement cycle and competitive dynamics. We assume 500 mln iOS install base pre the iPhone 8 launch and replacement rate of 32 months. Our estimates imply non iOS subscriber switch rate of ~5%, vs 10% implied during the 24 months post the iPhone 6 launch.
*) As a result of the ongoing barrage of "unexpectedly" negative sentiment, AAPL stock is trading at LOD, down over $11 from Friday's pre-selloff level, or nearly $60 billion in market cap lost in two days...