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iPhone sales decline may be worse than expected

Published Mar 8th, 2016 8:00PM EST
iPhone Sales Decline
Image: iMore

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It’s no secret that iPhone sales in 2016 are slated to decline for the first time in history, primarily due to an anticipated sales shortfall during the current March quarter. Hardly a projection championed only by analysts, even Apple CEO Tim Cook conceded that a drop-off in iPhone sales was to be expected.

“We do think iPhone units will decline in the quarter,” Cook said during the company’s January earnings conference call. “We don’t think that they will decline to the levels you’ll talk about. We aren’t going to project beyond the upcoming quarter.”

It’s not all gloom and doom for Apple, though. With the iPhone 7 likely to be a monster hit, coupled with the impending release of the iPhone SE, many have taken the position that the expected drop in iPhone sales may very well be nothing more than an aberration. Still, some analysts are of the mind that Apple’s iPhone sales decline will not be as subtle as Tim Cook would otherwise have investors believe.

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Speaking to this point, Pacific Crest Securities analyst Andy Hargreaves recently lowered his price target on Apple shares due to ongoing concerns surrounding Apple’s ability to kickstart iPhone sales.

“While not much appears to have changed since mid-January,” Hargreaves explained to investors, “our demand and supply checks seem more consistent with sales volume at the low-end of Apple’s guided range.”

The Wall Street Journal reports:

Mr. Hargreaves is among those expecting a decline in sales. In fact, his forecast is below consensus estimates.

For the current period, Mr. Hargreaves cut his revenue estimate to $50 billion from $51.3 billion—the low end of Apple’s guidance and below Street consensus of $52.3 billion. He also trimmed his iPhone unit forecast for the quarter. He’s now expecting 47.5 million units to be sold, versus his earlier estimate of 49 million.

Of course, any reports of ‘doom and gloom’ iPhone sales scenarios should be taken with a grain of salt. Again, with the iPhone SE on the horizon and the iPhone 7 set for release in a few months, it stands to reason that Apple isn’t finished breaking iPhone sales records just yet. What’s more, Tim Cook also added that more than 60% of consumers who owned an iPhone when the iPhone 6 was released haven’t yet upgraded to the iPhone 6 or 6s. In other words, there are huge swaths of iPhone owners currently using iPhone 5s and 5 devices who are seemingly primed to upgrade. And who knows, perhaps many of these consumers are simply waiting for an advanced 4-inch iPhone model, something Apple will finally deliver with the iPhone SE later this month.

As a final point, it’s also worth noting that Andy Hargreaves has been one of the most aggressive and vocal Apple bears on Wall Street over the last few years. More than that, his track record hasn’t exactly left his clients swimming in money. As a quick example, Hargreaves in January of 2013 said that he no longer believes that the “demand environment supports a profit outlook that can drive AAPL materially higher over the next 12 to 24 months.” At the time, shares of Apple were trading at a split-adjusted price of about $71 per share. 25 months later, shares of Apple were trading at $130 levels, representing a 83% gain in the time frame Hargreaves anticipated shares would decline or stay about level.

Yoni Heisler Contributing Writer

Yoni Heisler has been writing about Apple and the tech industry at large with over 15 years of experience. A life long expert Mac user and Apple expert, his writing has appeared in Edible Apple, Network World, MacLife, Macworld UK, and TUAW.

When not analyzing the latest happenings with Apple, Yoni enjoys catching Improv shows in Chicago, playing soccer, and cultivating new TV show addictions.