Morgan Stanley just published a bombshell report about Apple: analyst Katy Huberty predicts that — for the first time ever — sales of the iPhone will drop in 2016.
A research note by Huberty says the bank expects unit sales of the iPhone to decline in Apple's 2016 financial year by nearly 6% (that is the equivalent of 2.9% in the 2016 calendar year).
iPhone sales have increased every single year since launch. In the 2007 fiscal year, the first year the iPhone was on sale, the Cupertino company shifted 1.4 million units.
Even in the post-iPhone 5S period, when sales growth was at its previous weakest, Apple never actually had negative unit sales growth.
By FY2012, this had jumped to 125 million units; FY2015 clocks in at 231 million, according to data compiled by Statista.
Morgan Stanley thinks that FY2016 iPhones sales will be 218 million – a 5.7% drop — while CY2016 sales will be 224,000 — a 2.9% drop. These predictions are significantly below Huberty's previous estimates, of 247 million for FY2016 and 252 CY2016.
So what's the reason for the tumble? Huberty points to "higher prices in international markets (ex-China) and maturing smartphone penetration in developed markets weighs on upgrades and new user growth."
If the prediction is right, it'll be a big deal. The iPhone is a huge part of Apple's business: More than two-thirds of its total revenues and profits. If the iPhone is going in reverse, it makes it significantly more difficult for Apple to continue to grow.
There have been hints that Apple's iPhone sales could drop in 2016 for a while. In August, Pacific Crest said iPhone 6 sales are "unrepeatable" and that investors should expect a drop-off. Ming-Chi Kuo, an analyst for KGI Securities, has also predicted a year-on-year sales decline for the holiday period.
AAPL stock has declined from about $132 per share in May to $113 now, in part on reduced sales expectations.
Morgan Stanley is predicting revenue growth of 2% in FY2016, down to the Apple Watch and other new services. It points to the smartwatch and Apple TV as "important barometers of the company's innovation capabilities under the leadership of Tim Cook. We are also encouraged by recent additions to Apple's management team, which expand leadership in key areas like retail, design, health, digital content, and recently autos."
In late September, Apple announced record initial sales of the iPhone 6s and 6s Plus – 13 million in three days.
