With Apple suffering from lackluster demand for its iPhone devices, Wall Street firm Credit Suisse was prompted to start the Cupertino, California tech giant at a neutral rating.
According to a report in Seeking Alpha, citing Credit Suisse, the firm expects iPhone sales to drop 12.4 percent this year, which would mark a much steeper decline than the 3.2 percent dip seen in 2018.
“iPhone is in a difficult spot with units >20 percent below peak as users are holding onto their devices longer than ever and price hikes have likely run their course,” Credit Suisse wrote in a research report to clients, per the report. The firm noted that 60 percent of Apple’s revenue came from the iPhone business last year.
In China, Credit Suisse warned there are much deeper issues, and that a turnaround in one of the largest mobile phone markets won’t happen until Apple rolls out a significant refresh of the iPhone. That is expected to happen in 2020, when Apple is planning to launch a 5G model.
The Wall Street firm is optimistic about Apple’s prospects given an increased focus on its Services offerings, but said it will take some time to yield big benefits. Services revenue is forecast to grow to $65 billion in 2021 from $40 billion last year.
Apple has been taking a big hit in China, as consumers in the country balk at paying a high price for the iPhone. The smartphone market is also getting saturated, consumers are holding onto their devices longer and Chinese phone manufacturers are rolling out higher-end devices at lower price points.
CNBC reported in February that Apple cut the prices of its iPhones in China by as much as 6 percent. The price cuts also extended to iPads, Macs and AirPods. Apple blamed its fourth-quarter revenue shortfall on its China business, with CEO Tim Cook saying at the time the shortfall was 100 percent due to soft iPhone sales, largely in China.