Despite heavy discounting during China's "618" shopping festival, UBS analysts warned that Apple (NASDAQ:AAPL) iPhone sales continue to struggle.
"iPhone 'sell-through' remained soft, declining 2% YoY (Source: Counterpoint)," the bank's note reads, marking the fifth consecutive month of year-over-year decline.
The weakness wasn't limited to China. "The US was weak despite an easy comp," UBS highlights. US sales reportedly fell a significant 16% year-over-year. Europe offered a rare bright spot, experiencing a "mini-upgrade cycle" after a long period of decline.
UBS emphasizes that discounting in China wasn't enough to stop Apple from losing market share. "We estimate iPhone sell-through in China was largely flat YoY during May-24 in a market that grew 11% YoY," the analysts report. This translates to a decline in iPhone share in China, falling from 16.9% to 15.3%.
UBS argues that "iPhone share loss to Huawei and other Chinese OEMs acts as a material governor on iPhone unit growth." Huawei, in particular, has seen a significant comeback, capturing 15.6% market share in China year-to-date, up from 10.1% the same period last year. This comes after a period where US sanctions hampered Huawei's ability to compete.
Looking beyond China, the weakness seems widespread. UBS breaks down iPhone unit performance, noting that in China, iPhone units were up 90 bps YoY vs a market up ~11% as iPhone lost share.
Meanwhile, in the US, iPhone units were down over 16% YoY vs a market down ~10% as the iPhone lost share. In Europe, iPhone units were up 19.5% YoY vs a market up 21% as the iPhone lost a modest share, while in India, iPhone units were down ~7% YoY compared to the market being down ~7% as the iPhone share was unchanged.
UBS maintained a Neutral rating on Apple with a $190 price target. They justify this valuation considering "a challenging growth backdrop, higher rates, and undefined AI strategy.".
