Cowen’s Apple analyst, Timothy Arcuri, projects the company could sell 50 million iPhones in the June quarter which would offset continued iPad weakness (with a larger version still several months out) and some concerns he has that Apple may not sell 3 million Watches in the quarter. Arcuri’s supply-side field work closely mirrors UBS’s Steve Milunovich’s Evidence Lab survey from two weeks ago that indicates demand for 51.1 million iPhones in the June quarter. (Note that I own Apple shares and have sold Puts which is a bullish strategy).
Apple could sell 50 million iPhones in the June and September quarters
At 50 million units Apple’s iPhone will show 42% year over year growth and decline 13% quarter over quarter (when adjusted for channel inventory), which would be the same rate compared to two years ago when the larger screen iPhone 5 was available. Note that last year the iPhone 5c and 5s had a 19% decline quarter to quarter.
50 million is the estimate that I am also currently projecting for Apple’s June quarter iPhone sales with the biggest concern being China Mobile’s slower 4G growth in April. Apple is also seeing its typical seasonal declines in smartphone market shares in most developed countries which indicates the company’s iPhone unit sales should be close to typical quarterly patterns. However channel inventory changes can lead to different reported results.
Arcuri also believes that Apple could sell 50 million iPhones in the September quarter. This isn’t too much of a stretch but could largely be dependent on when the next iPhone is available. While for the past three years Apple has shown increased June quarter to September quarter unit sales when adjusted for channel inventory unit sales declined by 1% in September 2012 and 4% in September 2013. They did increase by 8% last year but that was really driven by pent up demand for the larger screen iPhone 6 and 6 Plus.
Arcuri tweaked his estimates
Arcuri’s June quarter revenue estimate is $51 billion (was $50.7 billion) which compares to guidance of $46 to $48 billion and the Street’s $48.3 billion. His EPS projection is $1.88 (was $1.87) vs. Apple’s guidance of a range of $1.58 to $1.73 (when using all its guidance components) and the Street’s $1.74. His fiscal 2015 and 2016 EPS estimates are $9.29 and $9.75, respectively.
Price target goes from $135 to $140
Arcuri’s Apple’s price target is based on a 12x PE multiple on his calendar 2015 EPS of $9.32 and adding in dividends and net cash. It does feel a bit like Arcuri wanted to keep an Outperform rating on the shares so with the recent run-up he changed his estimates just enough to raise the price target so the shares wouldn’t have to be downgraded.
