By Jefferies analysts tempered expectations for the upcoming iPhone 16, citing supply chain checks that suggest only “moderate” to “not much” year-over-year growth.
In a note to clients on Monday, the firm points out that previous forecasts of double-digit growth for the iPhone 16 may be overly optimistic, leading to potential short-term pressure on the stock prices of companies in Apple’s (NASDAQ:AAPL) supply chain.
“While all eyes are on iPhone 16, channel checks show limited growth so high forecasts need to fall,” Jefferies writes.
The analysts highlight that although demand for high-end smartphones has been strong, growth headwinds are increasing as the market begins to stabilize after a period of recovery.
Jefferies attributes the anticipated slowdown in growth to several factors, including rising costs for components related to artificial intelligence (AI) and slowing upgrades in traditional smartphone features like display and camera technology.
“The emergence of AI potential for smartphones has likely accelerated the end of this honeymoon period for the supply chain, as BOM costs related to AI such as SoC, fast memory solutions and advanced packaging would have to rise, pressuring margin and the past spec upgrade roadmap,” they state.
“Real AI capabilities are likely two years away,” the report states, suggesting that hardware innovations in the iPhone 16 will be limited.
Despite healthy demand for high-end devices and potential market share gains in emerging markets, Jefferies expects iPhone 16 sales to be “positive but slow” and believes that inflated expectations for significant growth could lead to a reevaluation of projections.
“We believe iPhone 16 would sell well given healthy high-end demand and share gain potential in EMs. But hardware innovations on 16 are still limited, and its AI capabilities are only at its initial stage and available mainly in the US. Therefore, market talks of double-digit growth are likely
too aggressive,” concludes Jefferies.
