Jefferies says checks show “limited growth” by Investing.com

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 double-digit growth forecasts for the iPhone 16 may be overly optimistic, leading to potential near-term pressure on the share prices of Apple’s supply chain companies (NASDAQ: ).

“While all eyes are on iPhone 16, channel checks show limited growth, so big predictions need to come down,” Jefferies writes.

Analysts point out that while demand for high-end smartphones has been strong, headwinds are growing 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 artificial intelligence (AI)-related components and slowing upgrades to traditional smartphone features such as display and camera technology.

“The emergence of AI potential for smartphones has likely accelerated the end of this supply chain honeymoon, as AI-related BOM costs such as SoCs, fast memory solutions and advanced packaging are expected to increase, pressuring margin and specification upgrades previous. road map”, they claim.

“Real AI capabilities are likely two years away,” the report said, 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 sluggish” and believes that inflated expectations for significant growth could lead to a reassessment of forecasts.

“We believe the iPhone 16 would sell well given healthy peak demand and potential for share gains in EM. But hardware innovations on the 16 are still limited, and its AI capabilities are only in their infancy and are mainly available in the US. Therefore, the market is likely to talk about double-digit growth
too aggressive,” concludes Jefferies.