Thanks to a decline in demand for Apple’s iPhones in China, Goldman Sachs is warning the iPhone maker could post earnings that disappoint.
CNBC, citing the Wall Street firm, reported that Goldman Sachs said in a research report there are several signs of “rapidly slowing consumer demand” in China, which could impact demand in the fall. According to Goldman Sachs Analyst Rod Hall, the smartphone market in China has shown some improvement during the second quarter. Still, his forecast for third-quarter sales at Apple predicts a decline of 15 percent on a year-over-year basis.
The analyst did note that the newest crop of smartphones Apple unveiled in September could counter some of the weakening demand, but that overall the decline could hurt the bottom line for Apple.
“Much of Apple’s upside potential in our thinking was centered on Chinese demand for larger screen sizes,” the analyst wrote, according to CNBC. “Should weak consumer demand persist and impact the higher end of the market, Apple’s potential to beat and raise in FQ4’18 earnings is likely reduced.”
The Goldman Sachs analysts expect Apple to weigh in with earnings per share of $11.78 for the current fiscal year and $13.77 for 2019, noted CNBC. The stock was under pressure in trading as a result of the Goldman Sachs research note. In what the analyst said is a worst-case scenario, Apple’s calendar fourth quarter earnings per share could come in 4 percent under where Goldman Sachs currently is. Hall has a neutral rating on shares of Apple and a $240 price target.
The analyst expects Apple to have iPhone unit shipments of 80 million for the December ending quarter, with 13 million units of that forecast coming from China. It represents 16 percent of all the iPhone units shipped during that time period, noted CNBC. It is also down from 19 percent in December of 2017 and 18 percent in the December ending quarter of 2016.