Apple: Sales will Likely Decline this Year
Apple’s (AAPL) stock has been pretty range bound for the past few months and is trading about 12% below all-time highs. Analysts have been speculating weather Apple will post its first year-over-year decline in revenues this year for a long-time.
The launch of iPhone 6 last year was so successful that I believe it’s impossible for Apple to surpass that number this time around. Although Apple has been known to beat its own expectations every year, I think the sales of both the latest versions of the iPhones will decline this year.
The primary reason why I think this will happen is that the new iPhones don’t have as big of a selling point as the iPhone 6 and iPhone 6 plus did—bigger screen.
Moreover, large-screen phones are also very popular in China. Hence, the transition to a 4-inched screen was nicely received in China and it helped Apple increase penetration in the country. However, the iPhone 6S and iPhone 6S Plus have no such selling point, which is why I expect the sales to decline this time around.
Although Apple delivered a good quarter, investors should expect too much going forward. Replacement sales are a big growth driver for the iPhones during the first few months of its launch. Loyal Apple fans tend to buy the latest iPhone within the first few weeks of its launch, which is why Apple didn’t witness any weakness yet.
However, we’re now almost three months into the launch and sales should start to fall below last year’s level in the near future. Apple witnessed record sales in the last holiday quarter, but the chances of that happening again are very slim.
Moreover, there’s a recent report by Credit Suisse that found a cut in order for Apple suppliers. Credit Suisse supplier checks found the company cut component orders as much as 10% recently. This could be a result of Apple not expecting as strong of demand as it did last year.
Although Apple has a good track record when it comes to raising the bar, but I think the Cupertino giant will witness a decline in iPhone sales this year. The iPhone is the primary revenue driver for Apple and declining sales will definitely take a toll on Apple’s share price. Thus, I think investors should sell the stock for now and wait for a better entry-point in the near future.