Although countless analysts have incorrectly predicted Apple’s impending demise for years now, the company’s most recent guidance was enough to give one of the top Apple observers around some real reasons to pause. Neal Cybart writes at Above Avalon that there is reason to worry that Apple has been caught off guard by recent trends in the smartphone market and that the iPhone 7 might not be enough to turn things around.
DON’T MISS: Man dressed as Jesus arrested after refusing to leave Apple Store
“The company thought the iPhone 6s and 6s Plus would build off of the sales level associated with the very successful iPhone 6 and 6 Plus,” Cybart explains. “Instead, Apple is seeing iPhone sales fall 15% to 20% in 2016.”
Cybart also notes that Apple has made some uncharacteristic errors in projecting iPhone sales so far this year.
“On Apple’s 1Q16 earnings conference call, Cook said that he did not think iPhone unit sales would decline more than 15% in 2Q16 (in reality sales fell 16%),” he writes. “Cook then said that iPhone declines would trough in 2Q16 with better results during the back half of FY2016 given an easier sales comparison to prior year results. Apple’s weak 3Q16 guidance proved that comment to be grossly optimistic. These types of miscalculations are not common for Apple and demonstrate that management has been unable to completely grasp the full extent of slowing iPhone demand. “
None of this is to say Apple is “doomed” or anything close, of course. That said, one reason that it’s had such a sky-high stock price for the past several years is that investors have seen it as a company that will deliver solid growth. If that growth grinds to a halt, its share prices will follow.
“When looking at all of these iPhone warning signs, it is becoming clear that Apple has a significant iPhone growth problem on its hands,” Cybart concludes. “The combination of a slowing iPhone upgrade rate and declining number of growth catalysts for expanding the iPhone’s addressable market will make it very difficult for management to report unit sales growth going forward given its current strategy.”
