JPMorgan Thinks iPhone 7 Sales Expectations Need To Be Lowered

Apple may have gotten a lot of attention about the launch of the iPhone 7 and iPhone 7 Plus, particularly with the major carriers talking about huge preorders for the devices, but JPMorgan says investors should lower their expectations.

In a research report covered by the media on Monday (Sept. 19) JPMorgan Analyst Rod Hall said the positive reaction to the iPhone 7 is “premature” and that the iPhone growth in the U.S. year over year will likely come in at 4 percent for the December quarter, which he said is in line with JPMorgan’s below-consensus iPhone sell-through expectations.

According to the analyst, the subsidies the four major U.S. carriers rolled out with the iPhone 7 will probably end in October, which was similar to last year. What’s more, he said that, at Verizon and AT&T, the volumes are up because of the aggressive promotions but aren’t substantially higher than previous expectations.

“The U.S. currently accounts for 35 percent and 32 percent of our September and December quarter iPhone unit estimates, accordingly,” wrote the analyst. “Notably, we are expecting 4 percent Y/Y growth in the U.S. in the December quarter and a 2 percent decline in September after a 5 percent decline in June.”

The analyst did note the problems with the Galaxy Note 7 launch, in which the battery can catch fire, couldn’t have happened at a better time for Apple and is a “windfall” for the company. Nevertheless JPMorgan isn’t changing its tune. The analyst said he is sticking with his cautious late-2016 stance on Apple “based on our below-Street iPhone expectations, though we continue to believe the stock is undervalued with better options for growth in 2017.”

The iPhone 7 officially launched in stores this past Friday but was void of the long lines that characterized previous launches. Some speculated it was because many customers preordered their devices. Whether or not that is true will take some time to come out since Apple has opted not to provide updates on the unit sales during the first weekend of preorders or when it’s officially on sale.