Apple Inc. may need the iPhone 7 specs to really surprise if the firm wants to hold onto its position at the head of the tech world. As rumors about the firm’s next major release build, traders appear to be running in the opposite direction. Wall Street is worried that Apple won’t be able to keep up the pace of recent years, and iPhone 7 rumors aren’t putting them at ease.
Apple has likely just had an incredible few days in terms of sales, but Wall Street is betting that things will get worse for the firm from here on out. Despite rumors about the iPhone 7 specs coming through in recent days, the firm’s stock has dropped to local lows. At time of writing Apple Inc. stock was selling for $106.64 down 1.29 percent for the day so far.
iPhone 7 rumors start to build
The iPhone 7 specs we’ve seen in recent days confirmed a lot of what we thought we were going to see in the device. According to report from Ming Chi Kuo of KGI Security, one of the most trusted purveyors of Apple yarns, the device is going to be thin and fast. The iPhone 7 release date will arrive, according to the analyst, next September, just about one year after the launch of the iPhone 6S.
In reports over the last few months Mr. Kuo has revealed that 3D Touch will be part of the iPhone 7, that the phone will measure in between 6 and 6.5mm, that it’s going to have the A10 chip on board, and that the iPhone 7 Plus will have a whopping 3GB of RAM. Mr. Kuo correctly described the iPhone 6S months before it arrived, so his word on the iPhone 7 specs should be taken with a good amount of weight.
Less weighty, however, are iPhone 7 rumors from other sources. We’ve heard in recent weeks that the iPhone 7 will drop the headphone slot, become waterproof, and have an edge to edge display. None of these iPhone 7 rumors has a decent source, though they are interesting speculations on the future of the Apple smartphone.
Gene Munster of Piper Jaffray reckons that there’s a 50 percent chance Apple will remove the Home button from the iPhone 7. That’s a rumor that Mr. Kuo has not addressed, but it’s one that many on Wall Street seem to be interested in. For the most part, however, traders on Wall Street just don’t care about the iPhone 7 specs and rumors. They had much more present and persistent anxieties to deal with this holiday season.
iPhone 7 specs don’t matter on Wall Street
Those with money behind Apple care about iPhone sales more than anything else, but they’re much more concerned with sales over the next year than with anything set to be revealed in 2017. The most recent smartphone from Apple, the iPhone 6S, is what they want to hear about.
Apple Inc. will post its earnings for the three months through December some time before the end of January. The most important number will be the firm’s sales of the iPhone for the three months, but a few other figures are also likely to be studied by Wall Street’s cadre of analysts.
On Monday morning FBR Capital cut its price target on the firm to $150, down from $175. Daniel Ives, one of the most vocal Apple bulls out there, said that the downgrade was based on lower iPhone shipments for the period ahead. He dropped his shipment outlook for the fourth quarter to 75.5 million, down from 77 million.
Just before the holiday break Timothy Arcuri of Cowen & Co. dropped his price target on the firm from $135 to $130. He said that he and his team “remain apathetic on iPhone units.” Mr. Arcuri kept the firm’s shares rated at Market Perform and said now was a good time to stick on the sidelines. He did say, however, that
For the year ahead all Wall Street seems to want is for Tim Cook to keep sales of his smartphone steady. Unit volume will need to be at around 75 million for the fourth quarter in order to keep Wall Street hopeful on the future of Apple Inc. . Given stock movement in recent weeks it appears that many don’t believe that can happen.
Waiting for Apple to grow
Apple Inc. is, by and large, a smart phone firm. The vast majority of its direct sales come from the iPhone, and the device is likely responsible for a whole lot of the firm’s indirect sales as well. If the iPhone 6S is as lackluster as Wall Street seems to think, then the iPhone 7 rumors may be all important going into the first half of 2016.
It’s clear that Apple Inc. will need to deliver on iPhone 7 specs that are not just strong, but also impressive and surprising in order to grow total sales of its device. The reason that so many on Wall Street believe that current iPhone sales are slowing is twofold. In the first instance it’s clearly difficult to grow sales beyond 200 million. The market is becoming saturated.
In the second instance it seems clear that the iPhone 6S isn’t as dramatically interesting to buyers as the iPhone 6 was. It’s a great phone, and the reviews have almost universally proclaimed it the best that Apple has ever made, but it’s just not that interesting given the slight nature of many of the changes.
This is something that Apple will need to fix when it’s working on the iPhone 7 specs. According to rumor the Cupertino firm is testing out more than one design for its next major smartphone release.
If the iPhone 7 specs don’t impress, then Apple may have to find a new way to grow in the years ahead. The smartphone business will likely give Cupertino billions in cash each year for a long time to come, but traders are clearly looking for growth to justify a P/E above 12.
With the TV service cancelled according to reports, the Apple Watch in danger of being a flash-in-the-pan and the iPad Pro failing to save the tablet business, it’s not clear where that growth can come from.
On Wall Street, however, analysts seem to believe almost universally that Apple will be able to deliver that growth. Some will be waiting for more concrete iPhone 7 specs rumors with bated breath, especially if the iPhone 6S failed to bring growth in the three months through December.