UBS analyst Timothy Arcuri says he believes the “worst of the bad news” for sagging iPhone sales is over in China and more.
The Apple bull told clients Wednesday that the worst of the slowdown experienced from its flagship product was in the rear-view mirror. The problem has weighed on Apple’s stock price and has for months dominated Wall Street dialogue on the company.
Arcuri drew on the firm’s updated analysis of its hardware supply chain in Asia, which showed signs of iPhone inventory beginning to clear in China. The region has been a major pain point for Apple, particularly since China’s iPhone weakness led CEO Tim Cook to issue a rare quarterly sales warning earlier this year.
UBS data shows Apple is beginning to clear its iPhone inventory in China, and is seeing an improving “tone” in Apple’s supply chain. “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 said.
UBS is increasing its June quarter iPhone sales estimate from 32.5 million units to 34.5 million, with a rise in sales of older models, such as the iPhone 8 Plus, offsetting sagging sales of the 2019 lineup. This has led to UBS dropping its March sales and earnings estimates from $57.5 billion ($2.40 a share) to $56.5 billion ($2.33 a share), respectively.
UBS expects to see procurement estimates for the iPhone XR are actually on track to increase quarter-over-quarter.
“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.”
Apple recently lowered handset prices in China in the wake of its disappointing performance in China.