Loup Ventures’ industry analyst Gene Munster predicts Apple will announce 41.6 million iPhones shipped in the June quarter. The number would represent a 3% year-over-year growth for the handset.
Munster believes the iPhone is “becoming a stable business, performing more like software than hardware.” This would indicate the product will enjoy slow but predictable growth over the next few years.
Munster also predicts:
- iPhone units of 41.6M, essentially in-line with the Streets 42M estimate. This implies 3% y/y growth.
- About $25B in capital return, which supports a 3-year path to net cash neutral. The Street is generally expecting a 5+ year timeline.
- Services growth of 19%, slightly higher than the Streets 18%.
- Guidance: we expect the midpoint of the guidance for Sep-18 to be 1-2% ahead of the Street. If the talk of three new iPhones this fall (one refresh of the iPhone X, one 25% larger model, and one lower-priced LCD model) is accurate, the Street’s 1% Sep-18 iPhone unit growth does not properly reflect that.
- The two most important takeaways from the quarter should be that the iPhone is becoming a stable business, performing more like software than hardware, and that the pace of the capital return is faster than investors have been expecting.
The Service growth is important for Apple, as while it has traditionally reaped its profits form hardware, services such as iCloud, the App Store, and Apple Music are giving the company an opportunity to grow revenues from other sources.
Munster also offered predictions for Apple’s long term outlook.
- The set up for FY19 is favorable, given the Street is expecting flat iPhone units (220M), which we view as conservative. We expect iPhone unit growth in FY19 to be 3%.
- The new paradigm related to investing in Apple, which is 2-3 years from becoming consensus, is defined by a stable iPhone business, a growing Services segment, a faster-than-expected capital return program, and the introduction of new products.
- Apple has four growth opportunities not yet reflected in AAPL’s share price: original video content, AR wearables, personal health, and autonomous vehicles.
Apple will announce fiscal Q3 2018 earnings on Tuesday, July 31 after the closing bell of New York stock trading.
