An investment note by KGI predicts that Apple will next week report year-on-year iPhone sales up 23.6% to 48.5M, but says that that holiday quarter sales will be down on last year, and that the decline will continue into the first quarter of next year.

KGI says that China is the big factor, included as a launch country this year, and hence contributing to calendar Q3/fiscal Q4 sales, while last year’s China sales fell into the holiday quarter. It estimates that 22M of the iPhones sold last quarter were the new iPhone 6s/Plus. Apple sold 47M iPhones in the previous quarter.

Despite the launch of the iPad Pro next month, both iPad and Mac sales will fall across all three quarters, predicts the report … 

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KGI estimates that Apple will report a 9.5% year-on-year fall in iPad sales, and a 1.5% fall in Macs. For these products, Apple may instead choose to highlight quarter-on-quarter sales, where KGI expects rises of 2% and 13.3% respectively.

The company has significantly reduced its opening quarter forecast of iPad Pro sales, from 4-5M units down to 2M units due to supply constraints following quality issues with the Sharp display panel used. Bringing the more expensive Pro into the iPad mix will, however, offset declining shipments, it suggests.

The forecast presents a mixed picture for the stock price. KGI says that the stock will likely fall next week unless the company provides upbeat guidance for the following quarter, but believes that the longer-term outlook is good. Most of the issues it covers are largely already factored into the share price, it says, and the market will soon switch its focus to future growth drivers next year.

Apple will announce its calendar Q3/fiscal Q4 results on 27 October. Its guidance is for revenue in the $49-51B range, with a gross margin of 38.5-39.5 percent.

One number we’re unlikely to hear from Apple is how many Apple Watches it has sold. Tim Cook has so far only said that the company has shipped “a lot” of Watches, and that shipments are growing. Analysts are essentially just guessing wildly.

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