Modest Growth Seen For Apple's Next-Generation iPhones – Investor's Business Daily

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As Apple (AAPL) gears up to release its next-generation iPhones this fall, it faces several challenges. They include Apple’s difficulty gaining share in emerging markets and the fact that consumers are holding on to their current smartphones for longer periods, a Wall Street analyst said Friday.

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Nomura Instinet analyst Jeffrey Kvaal predicted Apple’s iPhone sales will increase 2.5% to 225 million units in fiscal 2019, which starts Sept. 30. He described that projected growth as “modest.” Kvaal also does not envision a lift to average selling prices like the one Apple has seen with its current-generation handsets.

In a report to clients, Kvaal reiterated his neutral rating on Apple stock with a price target of 175. Apple shares rose 0.3%, near 191.60, in midday trading on the stock market today.

Apple stock has been building a flat base over the past 25 days with a buy point of 194.30.

Three Next-Generation iPhones Predicted

Apple iPhone sales will benefit from “a more reasonably priced lineup,” Kvaal said.

The Cupertino, Calif.-based company is widely expected to release three new iPhone models in September. They include a second-generation iPhone X, an iPhone X Plus with a 6.5-inch OLED display and an iPhone with a 6.1-inch LCD screen.

Kvaal expects the second-generation iPhone X to start at $899, $100 less than the current version. The iPhone X Plus is likely to start at $999, with the new LCD iPhone at $799, he said.

“Should consumers gravitate towards the newer lineup models rather than prior-gen iPhones, we believe ASPs (average selling prices) could be flat to up,” Kvaal said. “We would not expect the uplift to be similar to a roughly $90 increase in the iPhone X cycle.”

Less Aggressive Wireless Promotions

Lengthening smartphone replacement cycles remain a concern, he said.

Research firm NPD reported Thursday that U.S. smartphone users are upgrading their handsets on average every 32 months now, compared with every 25 months just a year ago.

One reason for the longer upgrade cycles is U.S. wireless carriers scaling back aggressive promotions in recent years, Kvaal said.

Also, the potential merger of T-Mobile (TMUS) and Sprint (S) would combine two carriers that have historically been more promotional than AT&T (T) and Verizon (VZ), he said.

In emerging markets, Apple is having a tough time gaining traction with its lower-priced iPhone SE handset. The $349 handset is more expensive than smartphones from rivals like China’s Xiaomi, Kvaal said. He said the iPhone SE, which hasn’t been updated since it debuted in March 2016, appears to be an “orphan.”

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