Goldman trims Apple estimates on lower smartphone growth

Goldman Sachs cut its price target on Apple to $124 from $136 and trimmed its estimates on lower smartphone growth but kept its ‘buy’ rating on the stock.

The bank said it was cutting its estimates to reflect lower growth expectations for the smartphone industry following the recent reduction of its global smartphone unit growth forecast for 2016/17 to 5%/4% from 6%/7%.

GS downgraded its FY16/FY17/FY18 iPhone unit forecasts to 211m/231m/223m from 212m/243m/251m, respectively. This compares to consensus of 210m/222m/234m.

Goldman’s FY 2017/18 earnings per share estimates are now $9.70 and $10.19, down 8% and 11% from the previous forecasts but still well above consensus of $9.06 and $9.48.

“Our reductions are driven by lower market growth, as well as lower ASPs on a greater shift from developed to emerging markets, which we expect will drive a higher mix of the lower-priced iPhone SE (and its successors) relative to the higher-priced iPhone 7 (and its successors).”

Nevertheless, the bank said consensus estimates for full year 2017 are too low as it expects an increase in upgrades with the iPhone 7 based on the pent-up demand evident in its recent US consumer survey.

The bank said the most significant new risk is the demand environment in China. Others include product cycle execution, competition, FX, and the pace of innovation.

Apple shares were down 0.5% in pre-market trade to $97.97.