Analyst cuts profit forecasts for Apple due to ‘materially weaker’ iPhone demand

Key Points
  • Bernstein predicts Apple will give a June quarter sales forecast below Wall Street expectations.
  • "Investors are squarely focused on the health of the iPhone business, as supply chain data increasingly points to weakness," the firm's analyst writes.
Customers looking at the Apple iPhone X
Chesnot | Getty Images

Apple's fiscal third-quarter financial results will significantly disappoint Wall Street expectations due to weak iPhone sales, according to a Bernstein analyst.

The firm predicts the smartphone maker will forecast revenue in the range of $47 billion to $49 billion for its June quarter versus the analyst average of $51.9 billion when it reports financial results Tuesday.

"Investors are squarely focused on the health of the iPhone business, as supply chain data increasingly points to weakness. Based on our detailed analysis of supply chain companies with historically high correlations to iPhone unit sales, we revise our iPhone unit estimates [lower]," analyst Toni Sacconaghi wrote in a note to clients Thursday.

Sacconaghi reduced his fiscal 2018 earnings per share estimate for Apple to $10.71 from $10.93 verus the Wall Street consensus of $11.43. He also lowered his iPhone forecast for the company's fiscal third quarter to 38.8 million units from 41 million units versus the 43 million units average estimate.

"We note that buyside expectations have come down considerably in recent weeks, and while such numbers would represent materially weaker than normal iPhone seasonality, they appear to be increasingly within the range of expected outcomes," he wrote.

As a result, he reiterated his market perform rating on Apple shares and his $170 price target.

"There have been a lot of data points out of Asia [citing TSMC] that iPhone is weak, particularly for the iPhone X," Sacconaghi said on CNBC's "Halftime Report" Thursday. "We think that people are replacing their phones less frequently. … Over multiple years that replacement cycle is likely to lengthen."

The company's shares dropped more than 4 percent over the past week. Investors grew worried as several Apple suppliers predicted a weak smartphone market.

Apple did not immediately respond to a request for comment. The company's stock closed up 0.4 percent Thursday.