Apple: CLSA Trims Target to $680; Why iPhone May Be Losing Share in Some Markets

By Tiernan Ray

In addition to estimate cuts today for Apple (AAPL) by Canaccord Genuity?s Mike Walkley, CLSA Asia Pacific Markets?s Avi Silver cut his estimates for this year and next, writing that the stock should outperform the broader market this year even though Apple?s iPhone is losing share in some developing-market parts of Asia and in Europe.

Silver cut his price target to $680 from $770, writing that Apple?s not having provided a cheaper model of the phone for the developing world ? meaning, one that?s lower in cost excluding any carrier subsidies ? and the lack of a larger screen option for the phone, has cost the company some share in certain regions:

Why Apple is losing share in some markets One could have reasonably argued that the launch of the iPhone5 versus the 4S should have yielded higher market share based on the change to the form factor and the fact that the 4S registered share gains despite lacking any form factor changes. The two key reasons (interrelated) it is not gaining share in certain markets are 1) screen size and 2) a much more competitive lineup from competitors after the iPhone launch. Apple?s lack of a near-5? screen along with highly competitive offerings from Samsung in the bigger-screen categories are leading to lower market share especially in mature Asia markets where consumers have shown a preference for larger form factors. That?s not to say Apple is not doing well in many of these markets. In fact, its market share is above 50% in some of these markets. However, we believe its share has been coming down from elevated levels compared to previous years.

Silver cites anecdotal evidence, gathered by his colleagues, in various markets of Asia representing upwards of 20% of iPhone demand:

Hong Kong ? our checks suggest market share for iPhone at the carrier level is still well above 50% but market share is still down YoY [...] Singapore ? checks by CLSA?s Oliver Campbell suggest mixed trends in the Singapore market, with share tracking slightly lower than a year ago [...] Taiwan ? CLSA telco analyst Frank Lin believes iPhone market share is increasing with the iPhone5 launch compared to the 4S [...] Korea ? this is clearly a Samsung stronghold but recent comments by CLSA?s David Lee still suggest iPhone sales are underwhelming and inventory is building [...] Comments from CLSA?s David Lee (Telecoms analyst in Korea): According to Chosun and Kyonghyang Dailies, iPhone 5 sales up to Jan 4 (c.1 month after launch) only amounted to 400,000 units. Expectations may have been close to 1.5m units for the first month given the strong trade-in conditions for existing iPhone users. KT has less than 2m existing iPhone users and SKT has less than 1m. The combined number is around 2.5-3.0m (5-6% of total population). Currently, the iPhone 5 sales number 10,000/day vs the Galaxy Note 2?s 17,000/day. The problem with the telcos is that they may be racking up some inventory (due to minimum guarantees) as both KT and SKT may have expected much higher unit sales. This may result in more subsidies during 1Q13. KT is impacted more by this.

The upshot of all that is that in the U.S., the ?trend is favorable,? and in China ?we believe momentum continues following robust first weekend sales in early December,? while in both Europe and in parts of Asia, demand for the iPhone 5 seems to be lower than what it was or the iPhone 4S a year earlier, writes Silver.

Silver writes that he thinks Apple should offer a lower-priced iPhone because it might add $5 per share to profit in fiscal 2014, even if it cannibalized higher-priced models. He also shares that his colleagues have projected what they think Apple may be working on this year, which includes ?4 new iPhone models for 2013; including the 5S (4? screen), a model with a larger screen than the iPhone5, a lower-end iPhone, and a dedicated China Mobile (CHL) model.?

Apple shares today closed down $3.21, or 0.6%, at $520.30.

Source: http://feedproxy.google.com/~r/barrons/techtraderdaily/feed/~3/N6acQazQo_Q/

awake mario batali lone ranger aaron brooks dave matthews band solar flares 2012 whitney houston will