Apple Forecasted to Report Record Earnings Next Week, but Will iPhone 8 Keep Driving
 

Barclays estimates that Apple will report a record-breaking $76.6 billion in revenue when it an**unces its earnings results for the first quarter of fiscal 2017 on January 31. Apple reported revenue of $75.9 billion in the year-ago quarter, and offers guidance of $76 billion to $78 billion for this quarter.

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UBS estimates Apple will report revenue of $77.8 billion next week, which falls on the higher end of Apple's guidance. UBS analyst Steven Milu**vich maintained a "buy" rating for Apple stock with a target price of $127?compared to $120 currently?in a research **ted issued to investors today.

Meanwhile, Barclays analyst Mark Moskowitz lowered his price target for Apple's stock from $119 to $117 in a research **te issued to investors today.

Moskowitz does **t expect "meaningful upside potential" for Apple in 2017. He believes customers increasingly "mixing down" by opting for the iPhone 6s in favor of the iPhone 7 could weigh on Apple, while he is also concerned about China and India failing to emerge as growth catalysts in the next 12 months.

He said the so-called "iPhone 8" will potentially have "** must-have advanced features," making him skeptical of a meaningful growth rebound for Apple in the second half of this year. He added that smartphones have become "more than good e**ugh" to serve the needs of most users over multiple years or until the device breaks.

While **t likely to have a similar replacement cycle of PCs (i.e., 5-7 years), we think the smartphone market and thereby the iPhone franchise stand to face incremental headwinds this year and next, as the smartphone useful life extends to 3 to 4 years from 2 to 3 years previously. As a result, the prospect of revolutionary tech**logy incorporated into the next iPhone (iPhone 8) is **t likely to counter the expanding useful life of smartphones in general.

Specifically, he said OLED display options, bezel or bezel-less designs, an embedded Home button, and wireless charging are commonly mentioned in its discussions with industry participants about the next iPhone, but that the new features might **t be able to reassert that "must have" element for customers.

Wireless charging in particular may be limited by the need to be close to a charging base. Moskowitz does **t expect wireless charging over greater distances to develop until 2018-2019 at the earliest. He ack**wledges that Apple could be making strides in this space by partnering with firms like Energous, but he maintains his view.

Nevertheless, he said Apple has a "sticky ecosystem" and a large cash balance that provide decent support for long-term investors.

Barclays predicted Apple has long-term growth opportunities related to India, its growing services category, the enterprise market, artificial intelligence, and possibly the cloud, but it does **t expect those potential "what's next?" opportunities to emerge as "major needle movers" for the company over the next 12 months.

Tags: earnings, Barclays, Mark Moskowitz, AAPL, UBS, Steven Milu**vich

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