Apple revenue from China forecast to fall 15% this year due to marketwide smartphone slowdown
Apple's revenue from China plummeted 26 percent year over year last quarter, and is projected by Sterne Agee CRT to fall 15 percent in fiscal year 2016, as the entire smartphone market faces struggles in that market.
In contrast, China alone was responsible for 43 percent of Apple's entire growth from calendar years 2011 through 2015. But analyst Rob Cihra noted in a note to investors on Tuesday that the struggles are not Apple-specific, nor are they competitive.
For Apple, its biggest issue is comparisons to staggering 84 percent year-over-year growth seen in fiscal 2015. There's also a slowdown occurring across China's entire smartphone market, to which Apple is not immune.
"Although from a competitive standpoint, some domestic Chinese vendors like Huawei continue to post strong growth, together with recent boomers including Oppo, we believe that this is more competitive share shift, with even previous darling Xiaomi's momentum having now meaningfully slowed," Cihra wrote.
Apple's massive growth in calendar year 2015 allowed it to gain 4 percent of the Chinese marketshare. Cihra believes those gains were Samsung's losses, as the South Korean vendor saw its market share slide 6 percent year over year.
Despite Apple's recent struggles in China, Chief Executive Tim Cook remains optimistic on the country of over 1 billion people. In comments made during his company's quarterly earnings conference call last week, Cook said the region is "a lot more stable" than some perceive.
Still, many investors are spooked by Apple's 26 percent dip in revenue last quarter, including activist investor Carl Icahn, who announced last week that he no longer owns shares in AAPL. Icahn said he still views Apple as a "great company," but he's concerned about interference from the Chinese government, which could "make it very difficult for Apple to sell there."
Sterne Agee CRT has maintained a "buy" rating for AAPL stock, with a 12-month price target of $135.
In contrast, China alone was responsible for 43 percent of Apple's entire growth from calendar years 2011 through 2015. But analyst Rob Cihra noted in a note to investors on Tuesday that the struggles are not Apple-specific, nor are they competitive.
For Apple, its biggest issue is comparisons to staggering 84 percent year-over-year growth seen in fiscal 2015. There's also a slowdown occurring across China's entire smartphone market, to which Apple is not immune.
"Although from a competitive standpoint, some domestic Chinese vendors like Huawei continue to post strong growth, together with recent boomers including Oppo, we believe that this is more competitive share shift, with even previous darling Xiaomi's momentum having now meaningfully slowed," Cihra wrote.
Apple's massive growth in calendar year 2015 allowed it to gain 4 percent of the Chinese marketshare. Cihra believes those gains were Samsung's losses, as the South Korean vendor saw its market share slide 6 percent year over year.
Despite Apple's recent struggles in China, Chief Executive Tim Cook remains optimistic on the country of over 1 billion people. In comments made during his company's quarterly earnings conference call last week, Cook said the region is "a lot more stable" than some perceive.
Still, many investors are spooked by Apple's 26 percent dip in revenue last quarter, including activist investor Carl Icahn, who announced last week that he no longer owns shares in AAPL. Icahn said he still views Apple as a "great company," but he's concerned about interference from the Chinese government, which could "make it very difficult for Apple to sell there."
Sterne Agee CRT has maintained a "buy" rating for AAPL stock, with a 12-month price target of $135.
Comments
Anyway, if no one buys an iPhone - because of the price for example - nothing is gained.
As older people are dying off (they never owned smartphones, younger kids are getting older and buying smartphones....sounds morbid but in the last 10 years, I doubt many 70yr olds were buying smartphones...but I know 13-16yr Olds will be...
While Henriette and Stanley (the couple in the 80s are still buying the TV guide to find out what's on tv, little Jimmy has grown up and is off to college with his new IPhone, while Stacey just got her license and needs a phone, and Alex just got a new job needs a phone also..all just adding to the user base
We'll see how the SE sells. These Analysts are basing this on very little (as usual).
Building out a capable cloud is also something they should do.
Licensing iOS is not a good idea. Apple needs to be in control of the hardware and quality control issues. Poorly built hardware is a recipe for disaster. But Apple should build an A series variant, perhaps the A9 built on an older node. Maybe the A8 or even A7 built on the newest node. Perhaps reintroduce the old A7 or A8 (like they did with the latest Apple TV). Reduce the cost of the CPU, memory and display as much as possible while still building a high quality product. Even if the device performs at the level of the iPhone 5 or 5S, it may be good enough to entice people to purchase an iOS device over an Android one. Especially if Apple can get the price point down to 150 to 200 dollars. Such a device wouldn't cannibalize the sales of the state of the art devices either like the SE will do to the 6S.
Apple can and should reduce the price of the iPhone. Once people are in the iOS ecosystem, it is difficult to move off of it.
I myself am looking forward to the next iteration of the Apple Watch with the S2 CPU. If it comes with an LTE modem, I will be purchasing the device. The Apple Watch in conjunction with the iPad Pro is the ideal combination. Much more so than pairing the watch with an iPhone. The watch is the next big thing.
The reason FEATURE PHONES STILL OUT NUMBER <sic> SMARTPHONES WORLDWIDE is because these are people who can afford a $13 phone that lasts 10 years.