Apple’s Wall Street Cheerleaders Grow Muted

For Apple, this all seems a case of “catch a falling knife” – that is, if we are referring to the stock price.

The stock has slid roughly 15 percent in the past month alone, with sentiment souring on iPhones, of course.

At this writing, the shares are down another few mid-digit percentage points to a recent $166, as analysts continue to slash their estimates for iPhone demand. And for the current quarter, which is limping toward its conclusion, the shares are off 25 percent.

Among the latest to ratchet down expectations: CNBC reports that Ming-Chi Kuo of TF International Securities, billed by the financial news site as “the most widely followed Apple analyst on Wall Street, whose calls typically move the stock,” has cut expectations for the flagship devices. And it’s a significant cut, as the analyst has taken down his projections by 20 percent for the first quarter of next year to a range of 38 million to 42 million devices, off from a 47 million to 52 million unit range. All told, he estimates that total iPhone shipments next year will be off 5 percent to 10 percent, to 188 million to 194 million.

“The increase in orders of legacy iPhone models cannot offset the decline of XR and XS series shipments because of the low season impact,” said the analyst in his note, as cited by CNBC.

The Friday note follows Piper Jaffray’s Thursday estimate cuts, where supplier commentary – and reduced guidance from those suppliers – has hinted that Apple’s own iPhone business is not meeting expectations, even where newer phones have received a solid embrace. The Piper analysts lowered their price target on the stock to $222 from $250, yet kept an overweight on the stock. Morgan Stanley has taken down price targets to $236 from $253 (again, the stock is at about $166), and China is a prime reason. The replacement cycles are getting longer.

No surprise, then, that services is where the company is looking next. As reported, Apple’s roughly $10 billion services business (that’s a quarterly rate) depends on the base that has been among the enthusiastic adopters of hardware, and would ostensibly be among the enthusiastic software/service users.

“When we look at our services business, we think about the fact that we have a very large and growing installed base,” CEO Tim Cook said on the company’s earnings call. “The installed base of all our major product categories is at an all-time high and has been growing over the last several quarters, so the opportunity for us to monetize our services business continues to grow over time.” Services need not be especially dependent on a hardware upgrade cycle, and across music, healthcare or video can offer up recurring revenues.

The installed base, as noted in this space early last month, tops 1.3 billion users, and apps seem to be the apt way to generate new revenues.

With the idea that new apps are the wave of the future, news came earlier this month that Apple has hired doctors to help the company develop its burgeoning healthcare business, with conduits into the Apple Watch and the iPad. Doctors are working in far-flung groups that are focused on the Apple Watch, or on health records. We could, of course, make jokes about “an apple a day” and the doctors … but amid languid iPhone sales, new service initiatives may be more than a Band-Aid solution.