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KGI: iPhone 5se/iPad Air 3 won’t significantly grow Apple’s revenues but new MacBooks coming soon could

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KGI’s Ming-Chi Kuo issued an AAPL investor report this morning that is mostly pessimistic on Apple’s prospects of meaningfully increasing iPhone and iPad sales in the first half of the year. The Taiwan-based investment analyst doesn’t see an upside to the release of the iPhone 5se or iPad Air 3 later this quarter, sees meaningful slowing in YoY 6S/Plus sales and isn’t yet excited about the iPhone 7

We revise down 2016F shipments of new 4-inch iPhone, as little new to offer. While the new 4-inch iPhone has been enjoying the media spotlight, we don’t regard the product as innovative, either in terms of form factor (similar to iPhone 5s, though distinguished by an upgraded panel cover glass from 2D to 2.5D) or hardware specs (with 6s as a benchmark, though a 12MP camera is higher spec than our expectation of 8MP). Moreover, considering the replacement impact on price cuts for iPhone 5s, we lower 2016F shipments of the new 4-inch model from 18-20mn units to 10-12mn units.

Specifically, KGI reiterates its 4Q15 iPhone shipments forecast of 77M units, and forecasts 1Q16 shipments to decrease 44.2% QoQ and 29.7% YoY to 43M units, due mainly to “lackluster iPhone 6s sales”. For 2Q16F, assuming iPhone inventory correction is healthy and shipments of new 4-inch models begin ramping up, KGI estimates iPhone shipments will be flattish or up slightly in the range of 42-45M units.

Although bear-ish on the iPhone and iPad Air 3, the new MacBooks coming in the first half of the year give KGI a reason to be optimistic.

We see MacBook as a stronger candidate for becoming a theme given solid growth in the business segment, as well as a potential upgrade to hit the market in 1H16.

If you are itching for some positive iPhone investment news, AAPL Bull Gene Munster from Piper Jaffray this week issued a report in which he sees AAPL stock rising 50% in the lead up to the iPhone 7 launch, as it has in the past few years:

“We are buyers of [Apple] going into next week’s earnings (Jan. 26) and over the next month based on a belief that over the next 6 months the stock will react similarly to past number change cycles (i.e., iPhone 5 and 6), and experience P/E multiple expansion,” said Gene Munster, senior research analyst at Piper Jaffray. Apple shares are poised for their best day in three months, recently trading up 3.7% to $99.89, after Mr. Munster, a longtime Apple bull, published an optimistic note on the tech giant Thursday night. The pop is a reprieve for Apple’s stock, which has tumbled 26% since its intraday peak of $134.54 in late April amid the broader market pullback and expectations of falling iPhone sales. It has underperformed the S&P 500 by 15 percentage points since its April high…

While the stock looks relatively cheap now, Mr. Munster noted that heading into the past two full cycle updates – those when the number changes (i.e. iPhone 5 and iPhone 6) – Apple’s multiple expanded both times, averaging a 30% rise, from March to September. Apple is set to debut its iPhone 7 in September. “The relative consistency in multiple expansion heading into a new product cycle…suggests that shares of [Apple] could have over 50% upside heading into the iPhone 7 launch in September,” wrote Munster.

Personally, I see a lot to be excited about as the folks who have been waiting for a 4-inch iPhone now have something to buy and buy off cycle. If Apple prices it reasonably and gets the modern features we’ve heard about, there certainly will be some upside. As for the iPad Air 3, if it can gain some of the iPad Pro features including a keyboard case and Pencil compatibility as well as 3D touch, it will certainly be a compelling buy, especially for big companies.

And, that’s assuming Apple doesn’t have any surprises coming this spring…

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Comments

  1. applegetridofsimandjack - 8 years ago

    Will there be new Macbook Pro’s? I dont see how they could change the design… It’s already so thin for what it can do… There’s nothing they can remove which they did have back when Macbook Pro’s hard hard drives and cd drives.
    Can we expect anything other than a spec bump?
    Personally I’ expecting Macs to feature the new Skylake processors and better graphics chips and faster PCIE storage. I’m hoping for a 32GB ram option but I don’t think that will happen yet… A redesign looks impossible to me at this stage.

    I’m looking to buy a new Macbook Pro to replace my early 2011 17inch Macbook Pro. But I hope I won’t have to wait until the end of the year.

    • J.latham - 8 years ago

      They could move all the ports (minus Audio maybe) to Thundrbolt 3.0 and USB Type-C for all of the ports on all of the MacBooks.

      • mahmudf2014 - 8 years ago

        Not having standard USB on a machine named Pro would be not good. So i don’t expect them to do this.

      • yoitssenghy - 8 years ago

        Thunderbolt 3 is what I am hoping for. Mahmud2014, having thunderbolt 3 is the equivalent of multiple standard USB ports if you purchase an adapter.

      • realgurahamu - 8 years ago

        @mahmudf2014 why not? The lowest spec macbook has proven it is possible. Even if out of the box it renders accessories utterly useless, the normal macbook has proven developers are eager to profit from the change by making new peripherals and accessories to add backwards compatibility. Hell, the macbook even has a magsafe option now thanks to third parties. Having fewer ports in the device itself makes more space for what could be layered batteries (if apple chooses to copy and paste this to the larger macbooks from the smaller). also would mean smaller motherboards and even larger batteries. better screen capabilities without destroying battery life. numerous benefits that could be named.

    • murat (@murat10) - 8 years ago

      I hope for new colors like space grey

      • Max Buondonno - 8 years ago

        That would be a great addition! I hope as well Apple adds different colors! It’d be pretty dope to have a space gray MBP, or MBA for that matter!

    • ShadowPeo - 8 years ago

      Oh bloody come on already, just release the damn new Skylake Pro Retina 15″ w/ discrete graphics, I am ready to throw this hunking PoS out the nearest window of the nearest skyscraper

      Having said that I am with Agent Apple I would like 32GB as I use VM’s all the time, and I would love 2TB+ of storage for the same reason, Space Grey to match the rest of my gear would be nice but I do not want too much of a re-design as much of my tech is based on the TB2 equipment (downside of working in shifts with another person, limited by the lowest common denominator) besides, I do not want to wait for my Hengedock, dock

      I know, selfish, self centred, and all that BS, but right now I am stuck waiting for panorama’s to process in Lightroom and I have had to much to drink, what can I say

    • donnybeattie - 8 years ago

      I love my early 2011 17″ Macbook Pro and I won’t let go if the 15″ is the largest I can get…

  2. aerobat01 - 8 years ago

    I wish they would bring back the 17″ MBP. My 2006 MBP17 finally gave up (but to be honest, I couldn’t do all the Adobe 3D stuff I wanted with the weak GPU and DDR limitation). I went to the iPad Pro as an interim fix hoping they would come out with an MBP bigger than 15″. Of course, now I could couple the 15″ Macbook with the iPad pro using Astropad and get a graphics tablet (It works great on the iMac27) … but it would be better still on a Macbook pro 17.

    • I’m with you on that one. We’re in the minority, but I’d already have bought a new 17″MBP to replace my 2009 model had one been available. Minority or not, the sales on a 17″ Notebook will always be significantly greater than on their desktop Mac Pro line.

  3. KGI has a decent track record on supply chain, but they don’t have the necessary insight into marketing nor customer demographics to make any kind of valued hypothesis nor projections on sales expectations. They’re simply way out of their depth and so obviously grasping for straws, trying to ride the wave of press at the moment for relevance. It’s sad. Or it would be if they weren’t part of the problem of people gaming the market.

    • tincan2012 - 8 years ago

      Ming-Chi Kuo and Mark Gurman have moles within Apple or their most important supply chains. Hard to know if these moles are somehow operating under Apple’s approval as some have suggested – for increasing media attention perhaps. Personally I think they harm AAPL by disclosing what are obviously trade secrets – dampening sentiment and making product releases unexciting. Bad on them.

      • macnificentseven48 - 8 years ago

        They’re probably being paid by the hedge funds investing in the F.A.N.G. stocks to ruin Apple’s credibility and reputation, otherwise, why would they waste so much time on scrutinizing Apple every week. Honestly, how many times a month do investors really need to hear iPhone sales are declining? There has to be an agenda behind that high amount of repetition. Just compare the amount of analysis written about about Apple compared to Amazon, Alphabet, Netflix or Microsoft. You’ll find more negative analysis about Apple than all those other companies combined.

  4. PMZanetti - 8 years ago

    The iPhone5s is still insanely popular. It is more popular that most Android phones. Apple let purposely held back the refreshed 4″ model last September in the hopes of driving a few more upgraders to the more expensive models…but the market proved that the people who want 4″ phones, actually want 4″ phones, and not just whatever Apple releases.

    iPhone 5se will be very very very welcome. I know I’ll be buying one day 1.

    • taoprophet420 - 8 years ago

      Or Apple is facing a delay in reducing the top and bottom bezels on the iPhone and decided to release a new 4″ model. Screen size doesn’t matter if Apple can reduce the bezels. You can have a 4.7″ device with a similar footprint of a 4″ device if you remove the home button , phone jack and slim down the bezels.

      The Asian market loves the larger iPhones and I don’t see who Apple wants to market a new 4″ model to. If The iPhone 7 reduces the top and bottom bezel the new 4″ model makes even less sense.

      • PMZanetti - 8 years ago

        No, you don’t get it. Bezels play a part in holding the damn thing. People that want 4″, want 4″. They don’t want 4.7″ squeezed into a smaller frame.

      • o0smoothies0o - 8 years ago

        The bezels need to be greatly reduced, yes, but a 4.7″ device will never be one-handed use device, because pretending you were only holding the 4.7″ display, with absolutely no bezels at all, very few people would be able to reach their thumb to the top left corner, and that’s assuming you are holding only the display.

        There should be a massive reduction in bezels and they should make a 5.7″ iPhone plus, a 5.0″ iPhone and a 4.3″ iPhone mini, and that should be the sizes for the indefinite future.

      • o0smoothies0o - 8 years ago

        @PMZanetti Bezels do play a part in holding the phone, a serious negative part. No one can seriously say they don’t want the bezels to be reduced, that’s absolutely ridiculous. The phone would be far easier to hold if it had far less bezels.

        The hardest part about holding the phones is the side bezels because obviously the wider the device is, the further up your palm the phone goes, and thus, the less reach your thumb has across the screen. If you have absolutely no side bezels then the device is far narrower and the phone sits further down your palm, and thus, your thumb teaches further up the screen, and you can hold the device easier in general due to it being lighter.

        In conclusion: the smaller the bezels the better in every way.

  5. rogifan - 8 years ago

    I’m so sick of rumor sites treating this guy as some sort of God. He’s just guessing like every other Wall Street analyst.

    • o0smoothies0o - 8 years ago

      You seriously need to get over whatever that guy did to your wife/husband.

      He is correct in hardware predictions very very often. He might be way off base on sales estimates or somewhat off base on timelines, but he gets a lot a lot a lot right.

      • macnificentseven48 - 8 years ago

        Yes, he is god. We should all listen to him espouse about Apple because Apple’s future depends on what Kuo says. Now why doesn’t Kuo go after Amazon, Alphabet or Microsoft after he denigrates Apple? In fact, if he’s that wise, why isn’t he rich and retiring to some South Sea island and sipping Mai Tais? He clearly thinks he’s smarter than Tim Cook.

  6. Ilko Sarafski - 8 years ago

    Almost nothing about the Pros… as of 2016, this is an interesting territory to me. I hope, too, that they’ll put the Skylake, improve gprahics and whatnot. But lets wait few more months and see. But my guess is, the next MBP will be a massive beast.

  7. macnificentseven48 - 8 years ago

    Kuo has spoken, so we must accept his word as being the absolute truth. It’s amazing how analysts have so much clout with Apple when their numbers are all over the place. Even their group consensus is usually way off. Why don’t they go after Amazon or Alphabet like they do Apple? I know Alphabet’s quarterly results are around the corner but I can’t find any information about the whether the company is doing great or not. With Apple, it’s always fail, fail, fail. With Alphabet, it’s more like a question mark when it comes to actual numbers.

  8. enginefd - 8 years ago

    I think that the only way I would purchase the iPad Air 3 is if it got Apple Pencil compatibility at the same fidelity rates as the Pro. Basically, I would like to see the iPad Pro but in the iPad Air form factor and have it include 3D touch as well. If Apple did this, they can have my hard earned cash right now.

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