Analyst sees 'iPhone 8' super cycle falling just short of 2016 iPhone 6 sales heights

AppleInsider · July 11, 2017 2:01PM

One analyst firm has broken from the pack, and is cautioning investors that it fears that the "iPhone 8" so-called "supercycle" may be overblown, and that the sales for fiscal year 2018 will fall just short of those lofty heights.

In an analyst note penned by Deutsche Bank, and seen by Business Insider, the factors that led up to the 2015 iPhone 6 and 6 Plus release was the "real super cycle." Factors cited in that release year that "will not repeat" including Apple's adoption of larger screens in the iPhone, and the addition of China Mobile.

Deutsche Bank also believes that given the lack of carrier subsidies in 2017, that people are now holding on to phones longer, with the average refresh cycle claimed to be 2.7 years at present.

Another point of pressure acting against a super cycle is a possible price hike on the iPhone 7S family, with the iPhone 8 likely retailing for well more than $1000. The analysts believe that this will have a net negative effect on demand.

"Generally, when prices go up, demand goes down," says Deutsche Bank. "A scenario where prices go up and demand goes up seems highly unlikely in our view."

Wall Street is modeling shipments at 244 million units for fiscal year 2018. Deutsche Bank sees about 230 million total units in the fiscal year starting in October 2017 -- just short of the 231 million in fiscal year 2015 with the iPhone 6.

Source: Deutsche Bank

The "iPhone 8" is predicted to sport an edge-to-edge OLED panel with a 5.1-inch user space -- the rest dedicated to virtual buttons. Slimming or removing the bezels would allow Apple to cram a larger battery into a form factor similar in size to the 4.7-inch iPhone 7. Also expected is a new 3D facial scanner .

With a complete redesign, plus the inclusion of a 2.5D curved glass back with wireless charging, some reports have pegged the starting price of the "iPhone 8" at more than $1,000, and others as much as $1,200.

MacPro · July 11, 2017 2:12PM

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

Mike Wuerthele · July 11, 2017 2:20PM

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

red oak · July 11, 2017 2:40PM

Here is their price target reduction to $105 just before Apple shares skyrocketed. These analysts at DB could not have been more wrong. They cite many of the same reasons now as they did then

https://www.streetinsider.com/Analyst+Comments/Apples+(AAPL)+Price+Target+Reduced+to+$105+from+$125+at+Deutsche+Bank/11208950.html

eightzero · July 11, 2017 2:54PM

In related news, an analyst predicts that Apple analysts will incorrectly predict how analysis will react to predictions by financial analysts.

mknelson · July 11, 2017 3:45PM

eightzero said:

In related news, an analyst predicts that Apple analysts will incorrectly predict how analysis will react to predictions by financial analysts.

Yes, and Overblown = just short.

Just short - subliminal messages?

avon b7 · July 11, 2017 3:49PM

Mike Wuerthele said:

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

That's how I see it. There are a lot of people that are potential upgraders. If brand loyalty remains high, one would expect this year's phones to hit the ground running and given the last big wave, I'd say a supercycle is quite likely. Whether they actually top the last big cycle or not is moot.

The analyst's claims are common sense and no doubt the 'sell' will be harder this time around as the competition has pulled its socks up across the board and there are a lot of tempting higher end phones at great prices on the market but brand loyalty will play a role in Apple's favour.

An iPhone user that doesn't upgrade today isn't a problem as the sale will come a little later. An iPhone user that upgrades to Android on the other hand, obviously is an issue if the numbers are big enough but Apple has time and options to counter that by reducing prices. That's mainly why I switched and I suppose it's the prime reason for most iPhone to Android switchers.

muthuk_vanalingam · July 11, 2017 4:30PM

Mike Wuerthele said:

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

With ASPs of iPhones increasing over the years, it would be a phenomenal achievement for next generation of iPhones to reach sales very closer to iPhone 6 generation. That would make it the BEST year Apple ever had!!! And that should HAVE been the headline.

jmey267 · July 11, 2017 4:36PM

Sherri Scribner who penned this piece of crap is always negative on Apple, If you listened to her and Deutsche Bank you will have missed a 30 percent stock price increase this year alone. Also their price target is far below just about every analyst out there and well below the current share price. I wish I had a job where i could be wrong this many times and still get paid.

78Bandit · July 11, 2017 4:40PM

Mike Wuerthele said:

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

A lot depends on your long-term versus short-term view of Apple stock. The biggest issue is what stagnant sales over a four-year period means for Apple's growth rate. This is the first major redesign since 2015 and sales have hovered around 230 million every year since. Previously Apple enjoyed a substantial increase in sales every year. Another year of essentially zero growth in units sold despite this being a brand new design would indicate the market is saturated. It is inevitable that Apple will reach that point, but the realization that saturation point was achieved three years ago would be a shock to the system.

Revenue has continued to grow as average selling price has increased. With the rumored $1,000+ price tag of the iPhone 8 I have no doubt ASP will increase in 2018 too, but Apple can't rely on increases in ASP to drive revenue growth very long. A $1,000+ device that is essentially the same hardware as a $700 Galaxy S8 won't be competitive once the early-adopters make a run on the first 20 million units. Unfortunately, what that will do is result in negative revenue growth in the following year as Apple reduces prices to maintain competitiveness. The double whammy of no unit growth in one year followed by revenue retrenchment shortly thereafter will be a short-term killer of Apple's stock price.

While it is true another 230 million unit year is a great year, Apple's stock price is based on much more. Even at zero growth Apple is a great company and will generate profits for shareholders for the foreseeable future. Unfortunately there will be a period of adjustment where the stock price has to take into account the stagnation of revenue growth and the stockholders can easily face a couple of years of bear market territory before it settles down to the new normal.

slurpy · July 11, 2017 5:20PM

red oak said:

Here is their price target reduction to $105 just before Apple shares skyrocketed. These analysts at DB could not have been more wrong. They cite many of the same reasons now as they did then

https://www.streetinsider.com/Analyst+Comments/Apples+(AAPL)+Price+Target+Reduced+to+$105+from+$125+at+Deutsche+Bank/11208950.html

And yet, even though they completely fucked their clients with this embarrassingly wrong outlook, they somehow still get paid millions for their "insights", and people still listen.

crosslad · July 11, 2017 5:20PM

In unrelated news Samsung's flagships don't seem to be doing as well in real life figures.
https://www.google.co.uk/amp/www.androidauthority.com/samsung-refutes-reports-lackluster-galaxy-s8-sales-786591/amp/

radarthekat · July 11, 2017 6:46PM

Mike Wuerthele said:

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

This is an argument I've made for years. Wall St myopically wants growth. If the Apple that grew 60-70% per year for a few years and then more recently leveled off had instead grown steadily at 30% until finally, a couple years still in our future, leveled off at the same high level of profits we've been at, Wall St would have assigned a 30x multiple. But what they miss is that the Apple we have, which grew fast early to the point where it leveled off earning 90%+ of the worldwide profits in smartphones is a company that, in sum total, made a lot more money (profit) than it would have had its growth curve been more steady, and therefore taking more time to reach the same high level of profits.

Which would you prefer to have started ten years ago; a coffee shop that grows fast to a high level of profits in a few short years and then levels off at that high level of profits? Or a coffee shop that grows steadily but took all ten years to eventually reach the same high level of profits? The first coffee shop would have cumulatively made much more profit over the ten-year period. That's Apple. Wall St is stupid. There, I said it.

radarthekat · July 11, 2017 6:51PM

78Bandit said:

Mike Wuerthele said:

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

A lot depends on your long-term versus short-term view of Apple stock. The biggest issue is what stagnant sales over a four-year period means for Apple's growth rate. This is the first major redesign since 2015 and sales have hovered around 230 million every year since. Previously Apple enjoyed a substantial increase in sales every year. Another year of essentially zero growth in units sold despite this being a brand new design would indicate the market is saturated. It is inevitable that Apple will reach that point, but the realization that saturation point was achieved three years ago would be a shock to the system.

Revenue has continued to grow as average selling price has increased. With the rumored $1,000+ price tag of the iPhone 8 I have no doubt ASP will increase in 2018 too, but Apple can't rely on increases in ASP to drive revenue growth very long. A $1,000+ device that is essentially the same hardware as a $700 Galaxy S8 won't be competitive once the early-adopters make a run on the first 20 million units. Unfortunately, what that will do is result in negative revenue growth in the following year as Apple reduces prices to maintain competitiveness. The double whammy of no unit growth in one year followed by revenue retrenchment shortly thereafter will be a short-term killer of Apple's stock price.

While it is true another 230 million unit year is a great year, Apple's stock price is based on much more. Even at zero growth Apple is a great company and will generate profits for shareholders for the foreseeable future. Unfortunately there will be a period of adjustment where the stock price has to take into account the stagnation of revenue growth and the stockholders can easily face a couple of years of bear market territory before it settles down to the new normal.

The question, of course being, why? Why does Apple stock have to take that hit? What you describe regarding growth is descriptive of the global softdrink market. KO revenues and profits have shrunk in the face of a saturated softdrink market the past couple years. Go look at its multiple. It's 31x. So the question is, why?

jmey267 · July 11, 2017 7:06PM

But with all of Scribners negativity she upped her price target to 132 from 130, what a whack job.

foggyhill · July 11, 2017 9:08PM

78Bandit said:

Mike Wuerthele said:

MacPro said:

So the analysts in question are setting AAPL expectations low. I'd rather see that that the opposite. I recall the day (and I know not if this was a Steve strategy or reality) Apple always low balled expectations then blew them away. These last few years the pattern has almost exclusively been the Wall Street expectations were ridiculously high (probably on purpose) so even great results were disappointing causing AAPL to drop like a rock immediately after great results were announced.

My issue is less with reports from analysts like this, and more with writers at regular media venues not seeing the numbers or comparing them to anything, and writing reactionary headlines about it.

1 million fewer sales than the iPhone 6 year makes it better than any year since, and any year before. It's still a great year, no matter how you cut it.

A lot depends on your long-term versus short-term view of Apple stock. The biggest issue is what stagnant sales over a four-year period means for Apple's growth rate. This is the first major redesign since 2015 and sales have hovered around 230 million every year since. Previously Apple enjoyed a substantial increase in sales every year. Another year of essentially zero growth in units sold despite this being a brand new design would indicate the market is saturated. It is inevitable that Apple will reach that point, but the realization that saturation point was achieved three years ago would be a shock to the system.

Revenue has continued to grow as average selling price has increased. With the rumored $1,000+ price tag of the iPhone 8 I have no doubt ASP will increase in 2018 too, but Apple can't rely on increases in ASP to drive revenue growth very long. A $1,000+ device that is essentially the same hardware as a $700 Galaxy S8 won't be competitive once the early-adopters make a run on the first 20 million units. Unfortunately, what that will do is result in negative revenue growth in the following year as Apple reduces prices to maintain competitiveness. The double whammy of no unit growth in one year followed by revenue retrenchment shortly thereafter will be a short-term killer of Apple's stock price.

While it is true another 230 million unit year is a great year, Apple's stock price is based on much more. Even at zero growth Apple is a great company and will generate profits for shareholders for the foreseeable future. Unfortunately there will be a period of adjustment where the stock price has to take into account the stagnation of revenue growth and the stockholders can easily face a couple of years of bear market territory before it settles down to the new normal.

The PE ratio is so absurdly low that the "adjustment" has happened long ago...

Radar's argument is mine. Wall Street is a complete idiot and the only justification for Apple's PE is they always believe they're on the verge of crashing hard.

There is no other rationalisation for having less profitable companies in saturated markets with no intellectual property or anyway to defend their market being valued with a PE of 30 while Apple languishes.

If it was seen as a company like Google, FB or Amazon, they'd be over a Trillion on the stock market already.

It's the fact that Apple doesn't play the PR stock pumping games of Google, FB, Amazon or Tesla that Wall Street doesn't like and punishes Apple for it.

Amazon's never going to have the profits to justify its PE even if it took 20% of all retail profits in the next 5 years, yet they have.had that for the last 10...

anome · July 11, 2017 11:36PM

eightzero said:

In related news, an analyst predicts that Apple analysts will incorrectly predict how analysis will react to predictions by financial analysts.

Analysis of analysts' analysis predicts analysts failing to analyse analysts' analysis analytically.

Seriously, how do I get a job as an analyst. Say what you want with no consequences when you're wrong? Sign me up!

tommikele · July 11, 2017 11:42PM

sog35 said:

This Analysts sees alot of dung.

Just look at what company he works for:

Deutsche Bank. The same bank full of losing tons of money, criminal charges, and other scandals. They had to reissue stock numerous times just to stay in business. They have a very real chance of going bankrupt. 36% chance according to one statistical think tank:

https://www.macroaxis.com/invest/ratio/DB--Probability-Of-Bankruptcy

Deutsche Bank can't even take care of its own business:

https://www.ft.com/content/56be629e-896e-11e6-8aa5-f79f5696c731?mhq5j=e1

Also don't forget this is the same Deutsche Bank that DOWNGRADED Apple in 2014 to a price target of $102.

https://www.streetinsider.com/Analyst+Comments/Apple+is+Out+of+Surprises,+Says+Analyst;+Deutsche+Bank+Downgrades+to+Hold+(AAPL)/9882296.html

When Deutsche Bank did this DOWNGRADE the stock was $97. In 4 months the stock went up over 30%. So you got SCREWED if you listen to these idiots.

Again why listen to Deutsche Bank about finance? The same guys that have 1 foot into bankruptcy and have been wrong about Apple in the past?

The analyst is probably dead wrong, but you need to grow up and stop wasting your time dragging up a litany of issues DB has been involved in. They have zero to do with one analyst's opinion of the next iPhone's prospects.

You have a short memory. Apple has faced accusations of misdoings, law violations and labor abuses all over the world. They have settled charges and paid some huge fines which would seem to indicate it's not all BS.

You have no idea whatsoever regarding DB's financial health and prospects. You googled and found a bunch of links you posted. BFD. Aren't you just wonderful and a world class analyst!

The ignorance in your post is more overwhelming than your childishness. You are having a three-year old's tantrum because you vehemently disagree with a analyst. It really shows you to your highest advantage. Grow up and stop acting like preschooler.

LordeHawk · July 11, 2017 11:50PM

Why would the 7s and 7s+ prices continue to increase?

"Another point of pressure acting against a super cycle is a possible price hike on the iPhone 7S family, with the iPhone 8 likely retailing for well more than $1000. The analysts believe that this will have a net negative effect on demand."

They're not getting all the fancy new tech...

I find it curious that such a "capable" analyst would warn investors on mere speculation, providing no proof. What if Apple did release a $1200 phone and it was worth every penny and then some.....

I think Apple knows what they're doing with a 10 year old project and has the data to back any decision. I have faith in Apple and will show it with my hard earned theoretical $1200 iPhone Pro purchase.

German ramblings:
Just bought my Audi Q7, what the hell is with the cup holders? Only the smallest bottled water fits in it.

foggyhill · July 12, 2017 3:37AM

LordeHawk said:

Why would the 7s and 7s+ prices continue to increase?

"Another point of pressure acting against a super cycle is a possible price hike on the iPhone 7S family, with the iPhone 8 likely retailing for well more than $1000. The analysts believe that this will have a net negative effect on demand."

They're not getting all the fancy new tech...

I find it curious that such a "capable" analyst would warn investors on mere speculation, providing no proof. What if Apple did release a $1200 phone and it was worth every penny and then some.....

I think Apple knows what they're doing with a 10 year old project and has the data to back any decision. I have faith in Apple and will show it with my hard earned theoretical $1200 iPhone Pro purchase.

German ramblings:
Just bought my Audi Q7, what the hell is with the cup holders? Only the smallest bottled water fits in it.

Bottled Water is against the environment... They save the planet that way. They think of everyhing those Germans ;-).