Apple to Face ‘Material’ Disappointment in 2019 as iPhone Revenues Will Decline 8%, New Street Says

Demand brought forward following the success of Apple’s (AAPL) iPhone X will drive an “air pocket,” leading to a material disappointment in the company’s performance in 2019, according to New Street.

The introduction of a lower-price premium OLED phone won’t be enough to make up for the shortfall, the bank warned.

Apple is likely facing a multi-year transition period, during which underlying iPhone demand is under pressure, as consumers refresh their device less often. While, Apple has played multiple levers to fight this trend, with unquestionable success, it has created variability in iPhone revenues, the bank added.

The bank said it expects iPhone revenues will decline 8% in 2019 versus consensus expecting 1% growth. Its forecast for 2019 and 2020 earnings per share is 9% and 6%, respectively, below consensus.

Apple’s multiples are also expected to compress 25%, leading the bank to issue sell rating on the stock with a $165 price target.

“Apple will announce a new product line-up and associated timing in September. From that point, expectations for the fourth calendar quarter will build up, mostly based on supply analysis and company comments. Weaker demand should be widely visible just ahead, or after the holiday season,” New Street said.