The analyst slashed the iPhone unit outlook to reflect challenges in the consumer spending sector. A new forecast is calling for 235 million units sold this year, down from the prior 245 million.
“The larger reduction in our forecast is being led by iPhone SE3 (now estimated to deliver less volume than SE2), and only modest cuts to iPhone 13 as we expect demand for the line-up to be more resilient,” Chatterjee said in a client note.
The analyst is more positive on Mac sales as he expects to see share gains for the 5th consecutive quarter. Chatterjee is calling for 6.5 million unit sales vs 6.3 consensus. This should help partly offset iPhone weakness.
Moreover, Apple is also experiencing tough comps and slowing consumer spending in the services sector.
“Growth trends for gross app store revenue, new downloads, and gaming revenue worsened in C1Q22, which while partly on account of tough comps, is also driven by the first sequential moderation in gross revenue since C4Q19. As a result, we continue to expect the moderating momentum on the App Store to limit Services growth in the +15%-20% y/y range in FY22.”
Apple stock could also suffer from more conservative guidance that is likely to incorporate consumer spending slowdown
“We expect Apple to guide to moderating y/y revenue growth in F3Q22 incorporating the impact of both the slowdown in consumer spending as well as tough compares. Forecast total revenue growth is +2% y/y in F3Q22 vs. consensus of +6% y/y,” the analyst added.
Chatterjee also calls for Apple to announce another dividend increase in the high-single digit percentage range with a buyback authorization of $90 billion.
The lower estimates pushed the analyst to cut the price target to $205.00 per share from $210.00.
The Overweight rating is maintained on the above-consensus projections for full-year revenue and earnings “led by our continued expectation for better than anticipated growth in Products as well as margin and earnings trajectory on the back of robust growth in Services.”
Apple stock price is down 1% in pre-open Monday.
By Senad Karaahmetovic