In the note seen by Business Insider, analysts Sherri Scribner, Adrienne Colby, and Jeffrey Rand write, "We believe investors will be disappointed by iPhone growth in FY-18 and FY-19." They believe fundamental challenges in the smartphone market are being ignored including saturation in mature markets, elongated refresh cycles, declining share, increased competition in China, and a growing secondary market.
Back in 2015, "everything went right for the iPhone 6 cycle." Sales were boosted by a several advantages that will not repeat including a much larger display and the addition of China Mobile as a carrier. "That cycle saw peak iPhone shipments of 231M in FY-15, a shipment level the company has not been able to repeat."
"Given most smartphones are now refreshed on a roughly 2.7 year cycle, we think FY-18 should be measured against FY-15. This cycle and our installed base estimates suggest Apple could ship about 230M iPhones in FY-18. However, Street expectations are modeling shipments of 244M units, implying an additional 13M iPhones shipments beyond refresh."
The Deutsche Bank analysts don't know where the additional 13 million iPhone buyers will come from as 65% of the smartphone market is for phones below $300 and the smartphone market is largely saturated already. Additionally, the smartphone market is seeing much slower growth than it did back in 2015. See the chart below.
There are also reports that the new iPhone will cost significantly more than the existing models and could be in limited supply. "Generally, when prices go up, demand goes down," wrote the analysts. "A scenario where prices go up and demand goes up seems highly unlikely in our view."
Of course, it's possible that Apple could steal significant market share from Android manufacturers if the device wows consumers enough to make the switch.
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