UBS analyst Timothy Arcuri is out with a new investor note taking a look at Apple’s performance as we enter the month of March. In the note, obtained by Business Insider, UBS outlines why it believes the “worst of the bad news” for iPhone sales is over in China and more.
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According to UBS data, Apple is starting to clear inventory in China, while supply chain “tone” is also improving. “While March mix is still bad, the tone in the supply chain is staring to improve and price reductions in China may be starting to clear channel inventory,” Arcuri says.
UBS has increased its June quarter iPhone estimate from 32.5 million units to 34.5 million. However, that’s not necessarily due to increasing success of the 2019 iPhones. Instead, Arcuri says interest in the iPhone 8 Plus and other older iPhones is “offsetting” a drop in more recent models.
Taking into account the higher sales of older iPhones rather than more expensive newer models, UBS has dropped its revenue estimate for AAPL to $56.5 billion for the March quarter. The firm had previously estimated $57.5 billion.
It’s not all bad news for the 2019 iPhones, though. UBS says procurement estimates for the iPhone XR are actually on track to increase quarter-over-quarter. This is an uncommon occurrence for an iPhone this late in its life cycle:
“While March mix is still bad, the tone in the supply chain is starting to improve and price reductions in China may be starting to clear channel inventory,” Arcuri wrote. “Procurement estimates for XR are actually now up Q/Q in June – atypical for this late in a ‘new’ model cycle (good near-term for QRVO), but reflective of inventory burn.”
After poor iPhone performance in China caused Apple to revise its Q1 2019 earnings, the company lowered iPhone prices in the country. In a recent interview, Tim Cook said that only time will tell how that strategy works for Apple in China.
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