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Apple Analysts Scramble Ahead of Next Week’s Earnings Report

January 22, 2016, 1:05 PM UTC
Apple Starts iPhone 6 Sales In Germany
BERLIN, GERMANY - SEPTEMBER 19: A shopper ltries out the new Apple iPhone 6 at the Apple Store on the first day of sales of the new phone in Germany on September 19, 2014 in Berlin, Germany. Hundreds of people had waited in a line that went around the block through the night in order to be among the first people to buy the new smartphone, which comes in two versions: the Apple iPhone 6 and the somewhat larger Apple iPhone 6 Plus. (Photo by Sean Gallup/Getty Images)
Photograph by Sean Gallup — Getty Images

The analysts’ notes that have crossed my desk over the past 10 days fall into two piles.

In one are reports from Apple specialists still reacting to the red flags coming from the company’s iPhone supply chain—warning signs that have helped push Apple’s share price to near its 52-week low ($92).

Read more about Apple targets here: Apple Analysts Knock the Stuffing Out of March iPhone Sales Estimates.

In the other pile are notes from analysts who think the stock market’s gone too far, and that the bad news has been fully baked into Apple’s (AAPL) share price.

Below: Excerpts from the latest batch.

Daniel Ives, FBR. Buckle the Seat Belts into Apple’s “Nerve-Wracking” March Guidance. Fears are mounting around weakening iPhone guidance on tap for the March quarter. While we expect a generally in-line FY1Q16 with a 75M-plus iPhone unit number viewed as the Street bogey, investor eyes will be more focused on Cook’s comments around China and, importantly, March/June guidance. We believe all-important China iPhone demand is very robust and holding up well, while U.S./EMEA sales have been the Achilles’ heel of this 6s product cycle, in our opinion. That said, at this point, the NYC cab driver knows that Apple has seen less-than-stellar demand for the 6s out of the gate with Asia supply chain data and Apple store checks all pointing to softness heading into the March quarter, and the Street appears to be bracing accordingly. While we acknowledge this “turbulent” period for Apple (and its investors) as 6s iPhone units have come down across the Street for FY16, we believe bearish sentiment has overreached, as Cook likely has a relatively low iPhone unit bar (50M as the key threshold) for the dreaded March quarter in the countdown to the mega iPhone 7 product cycle. Outperform. $150.

Kulbinder Garcha, Credit Suisse. Lower iPhones, adjusting GM, the last cut. With the news from the supply chain in recent months and the recent adjustment in build plans seen by our team in Asia, we again lower our iPhone units for the March quarter and for CY16 to 48.0 million and 207.2 million respectively… Despite this reduction in our estimates, we remain constructive long term given high retention rates, a superior ecosystem, a potential quickening of the replacement rate from the iPhone Upgrade Program, and a multi-product compute advantage. Outperform. $140.

Stephen Turner, Hilliard Lyons. Adjusting Full Year Estimates and Long-term Price Target. Our FY’16 and FY’17 revenue outlook has been reduced due to softer emerging market and global macroeconomic growth, considerable currency headwinds, and a trade down by consumers to older/cheaper iPhone models which reduces our average selling price. We also expect a lengthening in the iPhone replacement cycle as consumers are pushed away from two-year contracts and, in our opinion, will enjoy a lower wireless bill after their phones are paid in full. This is offset by Apple’s and others iPhone Upgrade Program which allows for an upgrade to the latest iPhone every year. We continue to believe the potential launch of the iPhone 7 will be a significant upgrade cycle, especially if Apple offers larger device storage, improved battery performance, wireless charging and waterproofing. We maintain our long term view that the iPhone user base continues to grow and the recurring base of revenue generates strong cash flows. Buy. Lowering price target to $140 from $154.

Anil Doradla, William Blair. Trimming Estimates on Demand Headwinds and Supply Chain Concerns. Over the past few weeks, we have witnessed multiple companies that are exposed to Apple’s supply chain highlighting headwinds resulting from slowing demand. Notable companies that have preannounced include Qorvo (QRVO), which receives roughly 40% of its revenue from Apple; Cirrus Logic (CRUS), for which Apple represents approximately 60% of revenue; and TSMC (TSM), which receives 20% of its revenue from Apple. Based on our industry interactions, the handset industry is experiencing strong headwinds that include a combination of macro-driven weakness, severe pricing pressures, and a crowded competitive landscape (predominantly on the price-sensitive Android handset front). While we expect the rest of the industry to be affected much more significantly, nevertheless we believe Apple will be affected by these headwinds. Consequently, we are lowering our estimates for the March quarter and the remainder of fiscal 2016. Outperform.

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Katy Huberty, Morgan Stanley. March Weak but June Outlook Better. Suppliers now see 40M iPhone builds in Mar quarter (down from 45M) with additional cuts in late Dec/early Jan partly attributed to supplier inventory levels. Initial indications are for better than normal seasonality in the June quarter which suggests estimates and sentiment may be bottoming. While the new round of supplier forecast revisions could pull down our March quarter forecast of 52M by a few million units, we see less unit risk in the remainder of the year in light of the upcoming 4” iPhone launch in April and iPhone 7 launch in September. Additionally, our math suggests suppliers overbuilt by 10M units in CY15, putting upward pressure on reported iPhone sales relative to supplier production plans in the near-term. Overweight. $143.

Gene Munster, Piper Jaffray: Historic Multiples Imply Bad News In AAPL; Buy Into Print. We believe the similarities between the situation in April 2013 and today are stark… Shares of AAPL were up over 50% one year after the April 2013 trough and up over 120% two years after… The difference this time is iPhone unit will go negative for the first time ever in Mar-16 (modeling for units down 10% y/y). We believe the similarity in setup lends us confidence that most company specific bad news is priced into the stock. Overweight. $179.

Aaron Rakers, Stifel. C1Q16 iPhone Expectation in Mid-40M Range Too Pessimistic. Given the continued debate on how investors are thinking about iPhone shipments into the March ’16 quarter (we believe buy-side sentiment has moved into the mid-40M range) we wanted to provide a more thorough review / analysis of iPhone shipment trends on a geographical basis… Our analysis of iPhone shipment trends across major geographies leaves us to consider a low-50M unit estimate (based on our maintained 74.7 million iPhone ship estimate in C4Q15), which we arrive at by applying a much higher sequential decline across all geographies when compared to the average seq. change across each geography over past 3-4 years. Buy. $140.

Wamshi Mohan, Bank of America/Merrill Lynch. Risk reward favorable again. Upgrade to buy. Our downgrade last Aug was on concerns over a lackluster 6s cycle. However, recent negative estimate revisions and multiple supply chain data points have pressured the stock and in our opinion these worries are largely now discounted by investors. We are bullish on several potential opportunities including the launch of the new Apple Watch, iPhone 6c, capital return update and the iPhone 7 launch in 2016. Key reasons for our upgrade are: 1) our China Apple survey which indicates continuing strong demand for iPhones, 2) potential release of iPhone 6c (4” version) which could drive increased conversions from feature phones, 3) AAPL stock remains underweight at long-only funds and there may be room for upside as investors increase their holdings, and 4) large cash balance which offers the optionality to enter new markets and create new revenue streams. Upgrade to Buy from Neutral. $130.

Rob Cihra, Sterne Agee. Mar-qtr iPhones Still Look like the Y/Y Trough; Trim Ests but Reit Buy. Focus is clearly on the Mar-qtr when iPhone comps are expected to turn negative for their first time ever and we trim our estimate another 3mil units to 49mil (now -20%Y/Y). Yet we continue to believe the Mar-qtr should already mark a trough in Y/Y iPhone declines that could enable the stock to recover. One help is comps getting progressively easier through CY16 but the other is our unchanged expectation Apple launches a mid-cycle refresh of its entry-level $450 iPhone (called 6c or 5e) in time to boost the Jun-qtr an extra ~3mil units Q/Q; not a game changing platform (more a 5s rebuild) but perhaps enough to narrow Jun-qtr iPhone declines back to ~5%Y/Y (we est 45mil total). Buy. $160.

Brian White, Drexel Hamilton. China 3G/4G Subs Rise by 34% in December and China Mobile’s 4G Surges by 247%. The concerns around Apple’s near-term iPhone trends have reached unprecedented territory and the headlines around China grow darker by the day; however, we believe investors will soon turn their attention to the planned launch of the iPhone 7 in September 2016, while also better appreciating Apple’s expanded push into Tier 3-5 cities in China and a big ramp in India. Also, we expect Apple products to be in high demand during the Chinese New Year that begins on February 8. Buy. $200 (as of 10/1/2015).

More as they come in.

For more on Apple, watch the following Fortune video:

Apple will report its fiscal Q1 2016 earnings and offer guidance for Q2 after the markets close next Tuesday. The call with analysts is schedule to begin at 5 p.m ET, 2 p.m. PT. We’ll be listening in, but you can too. Click here to listen to the conference call live.