Goldman Sachs predicts declining iPhone sales and lower stock price

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Goldman Sachs maintained its gloomy outlook for Apple yesterday by expressing the belief that the company will sell fewer iPhones during the last part of the year than the 67 million that the market anticipates.

Analyst Rod Hall told clients yesterday that it’s increasingly unlikely that Apple will meet its targets for average selling prices and unit sales later in 2019. He added that the market consensus was a strong recovery in China with demand in other parts of the world staying stable.

He explained that the increased sales for Japan and the US in 2018 were driven by an improved consumer environment combined with an attractive new product range towards the end of the year. This year, US consumer sentiment is dropping, and in Japan, the termination of subsidies might bring a volatile market.

In the last couple of years, Apple has tried to counter the fact that people are keeping their phones longer by introducing more upmarket features to the devices and making them more expensive.

This has not been uniformly successful. In the UK, France, and Spain, iPhone sales dropped by 11%, 12%, and 3% respectively last year. In China, unit sales dropped by 23% annually, and by as much as 44% during the last three months of 2018.

Hall believes that it’s too early to predict a recovery in China because local brands (e.g. Huawei) are very popular and the consumer market there is weak. He expects that Apple will sell around 61 million iPhones in the last quarter of 2019, which is 8% lower than FactSet consensus. He expects that the average selling price during Q4 2019 will be $806 – 4% higher than FactSet consensus.

Apple’s stock price increased slightly in premarket trading yesterday. So far, it’s 27% up over the last year, but Goldman Sachs’ price target is only $182, quite a way down from here.


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