Apple’s (AAPL) newest iPhone 8 is set to launch this autumn, but analysts say the latest model will have “disappointing” sales.
In a note to investors Monday, Deutsche Bank analysts Sherri Scribner, Adrienne Colby, and Jeffrey Rand wrote that “investors will be disappointed by iPhone growth in FY-18 and FY-19.”
According to the analysts, the market has been overly optimistic about iPhone 8’s sales and they seem to be forgetting that the company is currently faced with a number of factors negatively affecting iPhone sales. These challenges include saturation in mature markets, declining share and increased competition in China, elongating fresh cycles, and a growing secondary market.
This is in stark contrast to what Credit Suisse, Citi and Instinet have referred to as a “supercycle” that is poised to drive a new Apple rally, CNBC reports. According to these banks, several iPhone users who have not upgraded in years are ripe for an iPhone upgrade. Deutsche shrugs the idea as just a “regular cycle” of upgrade.
“The real supercycle was the iPhone 6 and iPhone 6 Plus cycle,” Deutsche Bank said., adding that the release of these iPhone models saw a peak in shipments of 231 million units in fiscal year 2015.
The bank further estimates that Apple will only ship about 230 million units in fiscal year 2018, which is far below the Wall Street consensus of 244 million units.
“Given most smartphones are now refreshed on a roughly 2.7-year cycle, we think FY-18 should be measured against FY-15,” the analysts said.
According to the Deutsche analysts, 65 percent of smartphone shipments are for smartphones below $300, which means iPhone might struggle to get the additional 13 million iPhone buyers to meet Wall Street’s expectations. Growth in the smartphone market is rather sluggish compares to its growth in 2015, and this may be because the market is largely saturated.
Apple has been experiencing declining revenues. The iPhone is still the company’s most lucrative product and so it’s banking on the release of the iPhone 8 becoming a huge success. Analysts have also expected a supercycle for the iPhone 7 during its release, but sales were not able to live up to expectations. The release of the iPhone 8 is threatening to become another failed supercycle, and this may adversely affect the future of the tech giant.
On July 11, Tuesday, report came that Apple engineers are fixing software problems in its much-awaited iPhone 8. According to the report, the company is fixing software issues related to the iPhone’s wireless charging system and the 3D face-detection sensor build into the phone’s front camera. If the software problems persist, the new iPhone may launch with major features disabled.
Shortly after, Bank of America Merrill Lynch analyst Wamsi Mohan also reported that the iPhone may ship 3 to 4 weeks delayed because of technical issues that need to be addressed. According to Mohan, problems with the finger print and 3D sensor were the cause of the delay. The company is yet to announce a launch date for the iPhone 8 but the new iterations are expected to be released in September. Mohan said that the launch date could be delayed.
Bank of America analysts are lowering their expectations for Apple’s third-quarter shipments by 11 million and fourth-quarter shipments by 6 million, CNBC reports. They also believe that the delay and low earnings on Aug. 1 may affect the company’s stock and give clients an options trade to benefit from the sell-off.
Apple is set to launch three new iPhone models: the iPhone 7S, the iPhone 7S Plus and the iPhone 8, which is reported to have a hefty price tag of $1,200.
Meanwhile, Deutsche Bank maintains a “hold” rating with a price target of $132. Apple stock closed at $147.77 on Thursday.