Apple (NASDAQ:AAPL) will face dramatically slowing growth in its next fiscal year, ending September 2014, as the smartphone market reaches its saturation point, Jefferies & Co. analyst Peter Misek wrote in a note on Monday morning. Misek also cut his price target on the company’s stock to $800 from $900, though his estimates for the year remained above Wall Street consensus, he maintained a Buy rating on the shares, and even predicted that Apple would launch an iPhone 5S in the calendar third quarter of 2013.
Is the Bad News Actually Bad?
According to Misek, his trip to Apple’s Asia-Pacific suppliers suggested that iPhone build plans indicated a deceleration of around 20 percent in calendar year 2014, “likely due to developed market smartphone saturation.”
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In addition, Apple suppliers cited multiple factors, including investments for next-generation technology and slower or more expensive semi-node transitions for a decrease in the rate of cost concessions the iPhone maker typically receives. “While our fiscal year 2014 estimates of $236 billion [in revenue] and $62 [in earnings per share] are above Wall Street’s $223 billion [in revenue] and $59 [in earnings per share], the potential negative margin leverage (revenue +9 percent, EPS +6 percent) will likely compress the multiple,” Misek wrote about Apple.
However, there are no immediate worries, with build plans for the current quarter appearing better than his estimates and better than the recent pessimistic talk on the Street.