Apple working to reduce excess inventory ahead of 'iPhone 7,' Brean Capital says

Posted:
in AAPL Investors
iPhone shipments in the coming quarters could be lower than Wall Street expects, as Apple works to reduce excess channel inventory ahead of the anticipated "iPhone 7" launch, in what could be the last painful quarter before over a year of growth, according to Brean Capital.




Analysts Ananda Baruah and Shenlun Wang of Brean Capital LLC predict that iPhone inventories will bottom out in the June and September quarters, as Apple works to reduce excess supply. Come December --?the anticipated first full quarter of "iPhone 7" availability -- they believe Apple could see the start of five straight quarters of growth, reaching a target price of $125 per share.

Until then, Baruah and Wang cut their iPhone estimates for both the June and September 2016 quarters to 40 million units. Those numbers are below Wall Street expectations, estimated to be around 42 million units for each three-month frame.

Brean estimates that Apple entered calendar 2016 with between 17 million and 18 million of iPhone inventory in the channel, and that the company would like to reduce that number to about 10 million units in time for the "iPhone 7" launch, expected in September.

The firm's estimates project that Apple reduced March quarter inventory by just a half-million units. Apple itself guided for a $2 billion reduction in the current June quarter, which Baruah and Wang equates to about a 3 million iPhone unit channel reduction.

"If our supposition and math is accurate, that leaves AAPL with 3M-5M more units to remove from the channel in the (September quarter)," they wrote.

But once the "iPhone 7" hits, and excess channel inventory has been moved, Brean believes iPhone sales will be in a position to return to growth at the end of 2016.

The firm also believes Apple could introduce its 2017 iPhone, with a new "form factor leap," earlier than expected next year, potentially around June or July. That would be a break from recent history, where Apple has stuck with September launches for new iPhone models.

The 2017 iPhone is expected to have a wrap-around AMOLED glass screen with features like Touch ID and FaceTime camera integrated into the display itself.

Comments

  • Reply 1 of 5
    maestro64maestro64 Posts: 4,479member
    At least these idiot did not say they were sniffing the supply chain to come up with this prediction. They came right out and said it was their prediction, they are probably correct, Apple most likely would want to burn down inventory coming into a new product model, that is obviously, they much have learned something in the business school classes. 
  • Reply 2 of 5
    spice-boyspice-boy Posts: 741member
    People will buy the new model, Apple with tout some improvements in camera, speed and as we have already learned about iOSX (an important and feature rich update) and perhaps something special we do not know about to entice owners of older phone to get the iPhone 7. I think in general the economy world and USA is showing signs of slowing so I think 2017 will not be a real improvement that the experts are predicting. 


  • Reply 3 of 5
    zoetmbzoetmb Posts: 2,422member
    spice-boy said:
    People will buy the new model, Apple with tout some improvements in camera, speed and as we have already learned about iOSX (an important and feature rich update) and perhaps something special we do not know about to entice owners of older phone to get the iPhone 7. I think in general the economy world and USA is showing signs of slowing so I think 2017 will not be a real improvement that the experts are predicting. 


    The economy is not slowing for people with money.   Apple has benefited from people upgrading every year, but I think we're going to see a lot less of that as no one really cares that someone else is walking around with the very latest phone.   I think most consumers will put themselves on a 2-3 year schedule if they can still get a subsidized phone and much longer if they can't.   Let's not forget that the iPhone did not take off in the mass market until subsidized plans were offered.   It's one thing to spend an extra $200 every year or two, it's quite another to spend $600 or more. 

    If it's decent, I can see a large percentage of the people who own the iPhone5 and earlier upgrading.   
  • Reply 4 of 5
    fastasleepfastasleep Posts: 2,544member
    zoetmb said:

       It's one thing to spend an extra $200 every year or two, it's quite another to spend $600 or more. 
      
    Isn't it the same thing in the long run given you just pay more with the "subsidized" plans over two years? Or actually more expensive than buying the phone outright? 
    stantheman
  • Reply 5 of 5
    If it's decent, I can see a large percentage of the people who own the iPhone5 and earlier upgrading.   
    Demand depends in large part on how necessary people perceive the upgrade to be, e.g. how good the phone is. I think we're off base when we talk about peak iPhone saturation. It's only peak if Apple stops innovating or its competitors are seen as offering more device for the same or less money. 

    It's ultimately all about innovating. 
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