Apple’s iPhone 7 Sees Discounting as China Sales Fall

Jun Zhang today reiterates a Neutral rating, and a $102 price target, warning that sales of the iPhone in China, he estimates, are “still weaker than retail channels” as discounting of the phone has popped up across the country.

iPhone sales, presumably in dollars, he doesn’t specify — fell by 6% in November, and are probably down “slightly” from November this month, as discounting takes hold outside of tight supplies at Apple’s online store:

Overall iPhone sales in China were down 6% in November and slightly down MoM in November due to some pushes in “single day” sales. In our view, iPh- one 7 sales will continue trending down and many retailers in China have al- ready started discounting ($50) the iPhone 7 in November. iPhone 7 Plus sup- ply is catching up in November, and sales have grown MoM in November. iPh- one 6/6S sales continue to be weak. The 7 Plus model currently accounts for 60% of iPhone 7 sales in China. We started seeing some retailers discounting this model in November. In our view, there is a waitlist if ordered from Apple’s online store, but consumers can easily buy them from local stores and third party retail stores. Since the jet black mod- el has high return rate, Apple might try to control capacity. Overall, we believe iPhone sales in China are still weaker than retail channels expected.

Zhang also cautions investors not to be mislead if they hear of component orders rising come the March quarter. In his view, “Some noise of Apple increasing orders might come from the iPad instead of the iPhone,” given he sees Apple refreshing the various iPad models in March.