This chart of estimated iPhone unit sales from analysts Tavis C. McCourt and Mike Koban at Raymond James tells you all about the malaise at Apple.
Nearly all investment analysts think Apple's iPhone sales have gone into decline, because the iPhone 6s and iPhone 6s Plus updates late last year were not exciting or distinctive enough to tempt users to give up their old phones and buy a new one.
The worst annual sales estimate we had seen, from Pacific Crest, was a decline of 8% in unit sales. Now, Raymond James has gone one better — or worse — than that, with an estimate that sales will be down 10% in Apple's 2016 fiscal year. Here is what that looks like (our annotations are in red):
The real shocker is that the two do not think the iPhone 7 will increase sales. That would be a bizarre scenario: iPhone sales each year hit a peak in the December quarter after the new models launch in September or October. In years in which Apple launches an "S" model, sales are generally weaker because those updates are less dramatic. Years with a new number model, i.e., iPhone 7, which feature a new design with new hardware, gadgets, and functions, have always set sales records.
So Raymond James is suggesting that will come to an end, according to its note from Wednesday:
The net of this is that we are lowering our EPS slightly, and although we do expect growth in 2017, we do not expect a major iPhone 7 bounce-back.
The chart also estimates that iPhone 8 sales, due in the December quarter of fiscal-year 2018, will be flat. The two think sales won't resume their upward course until 2017:
Assuming a normal maturation of the business, along with the smartphone market, we believe the December iPhone 6S shipments were slightly above trend line as well, which, combined with the iPhone 6 strength, has likely left a "hangover" effect for the remaining life of the 6S and into the 7, similar to what was witnessed with the iPhone 5 and 5S. We expect the "trough" quarters to be below trend line due to this, and then a return to normality as calendar 2017 proceeds.
Their analysis is supported by some consumer research showing good customer retention for competing Android phones. That, again, is surprising because until recently Apple appeared to have been claiming share from Android. The assessment suggests two things will go wrong for Apple simultaneously: 1) The iPhone 7 update will not excite new consumers or existing Apple customers with older phones; and 2) Sales in the US, China, and India — where Apple is starting to open retail stores — will all falter at the same time when historically they have only grown.
That scenario would be a huge shock, especially as we're starting to hear that Apple may indeed have something exciting planned for iPhone 7: cord-free wireless headphones and a total redesign of the body casing.
Here are the numbers:
- Raymond James' Fiscal 2016 quarterly iPhone unit sales estimates:
- December: 74 million (vs. 74.5 million in 2015)
- March: 48 million (vs. 61.2 million in 2015)
- June: 42 million (vs. 47.5 million in 2015)
- September: 43 million (vs. 48 million in 2015)
- Calendar FY 2016: 207 million (vs 231 million in 2015) = 10% decline.
