There have been several reports lately suggesting that, due to weak demand, Apple (NASDAQ: AAPL) has begun scaling back its iPhone build plans for the coming quarters.
Continue Reading Below
Image source: Apple.
Now, analysts with BlueFin Research Partners (via Barron's) say that for the March quarter, Apple now plans to build 53 million iPhone units, down from previous plans to build 59 million iPhone units.
The reduction in total unit build plans, the analysts say, is due to "sharp reductions in iPhone 7 and [iPhone] SE models."
On the bright side, the analysts say that build plans for Apple's larger and more expensive iPhone 7 Plus are "unchanged."
The analysts now expect Apple to ship 77 million iPhone units in the current quarter and 51 million units in the coming quarter. For some context, Apple shipped 74.779 million iPhone units in the first quarter of fiscal 2016 and 51.193 million units in the second quarter of fiscal 2016.
For the entirety of fiscal year 2017, the analysts reportedly expect Apple to ship 222 million iPhone units -- up from the nearly 212 million that Apple shipped during fiscal year 2016.
iPhone 7 Plus innovation paying off
It's interesting to note that demand for Apple's expensive iPhone 7 Plus is seemingly strong, while demand for the smaller (and cheaper) iPhone 7 and the low-cost iPhone SE seem to be trailing off.
BlueFin says that Apple reduced its iPhone SE build plans for 2017 to just 25 million units, down from 35 million, and that the "[iPhone SE] follow-on project [is] no longer visible."
The iPhone 7 Plus has a nifty dual-lens camera that no other iPhone model (and very few competing smartphones) has, and that feature might explain the outperformance of the iPhone 7 Plus relative to the other models (iPhone 7, iPhone SE).
Apple's customers seem to be willing to pay a premium for exciting, useful innovations.
The worst may be behind Apple
After a huge growth cycle with the iPhone 6 series smartphones, Apple saw a year-over-year decline during the iPhone 6s cycle, which obviously put some investors on edge given that Apple's financial health depends heavily on the iPhone product line.
If the predictions made by the BlueFin analysts pan out, then Apple could be looking at slight growth in iPhone unit shipments in the current fiscal year. That wouldn't bring Apple's iPhone shipments back to the levels that they were at in fiscal year 2015, but it would signal an end to the bleeding.
This year's iPhone 7 and iPhone 7 Plus brought several interesting enhancements (faster processor; better cameras, especially on the Plus; wider color display; revised Taptic Engine), but the basic form factors of the devices remained largely the same as their last two predecessors.
With next year's iPhone 8 series, Apple is expected to make some significant changes to the look and feel of the designs, as well as bring several under-the-hood technical innovations. Apple is even expected to deliver an ultra-high end model with a curved OLED display (which could be a big selling point by itself).
If products like the iPhone 7 and iPhone 7 Plus ultimately keep iPhone shipments during fiscal year 2017 flat-to-slightly up from the levels seen in fiscal year 2016, then there's certainly reason to be optimistic that Apple will see robust iPhone unit shipment growth in fiscal year 2018.
10 stocks we like better than Apple When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of Nov. 7, 2016
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.