With analysts continuing to focus on iPhone demand, UBS said in a note this week that data points to a flattish iPhone cycle for Apple (NASDAQ:AAPL).
The bank noted that immediately before and after Apple's recent quarterly earnings report, the market started to embed a recovery in iPhone unit demand, given the enthusiasm that AI is a tailwind.
"Specifically, the market expects AI capabilities and functionality announced at WWDC in June to drive a refresh cycle," highlighted UBS. "Therefore, sentiment has shifted from cautious in early April to considerably more bullish in mid-May."
Despite the sentiment improvement, the bank's supply chain checks, notably iPhone build rates, and analysis of Apple inventory and manufacturing purchase obligations are said to point to a prolonged challenging demand environment and a muted cycle.
"Recent checks point to iPhone procurement of 218-227M units in CY24, up modestly vs CY23 but below Y21/CY22 build rates," analysts explained. "In addition, at the end of Mar-24, Apple's inventory and MPOs were just $40.4B, down 16% YoY or about 14% of our projected next 12-month Product revenue estimate, in-line with the average of the prior four March quarters."
"Therefore, while we forecast iPhone revenue up 4% in the Sept/Dec qtrs combined (VA Cons +2%), a strong iPhone 16 cycle is unlikely in our view given our checks and analysis despite the AI enthusiasm ahead of WWDC."