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Apple's 'defining moment' is here — and it may mean moving past the iPhone (AAPL)

Tim Cook with iPhone
Tim Cook with iPhone

Getty

  • Apple's slow quarter for iPhone sales may spell trouble ahead for the smartphone.

  • The age of double-digit growth in iPhone sales may be nearing its end, according to UBS Analyst Steven Milunovich. 

  • But Apple has found ways to monetize its installed base through software and new accessories.

  • See Apple's stock price in real time here.



The era of double-digit sales growth for the iPhone may be nearing its end.

Apple is reaching a "defining moment," according to UBS Analyst Steven Milunovich, as demand for the iPhone — the device which catapulted the smartphone revolution and the company's earnings growth — slowed this past quarter. The slowdown suggests that the iPhone" supercycle" is dead.

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"The iPhone is now mature," Milunovich wrote. "A mature iPhone means that other categories, especially services and other products, will become material to growth."

The supercycle is marked by a fresh wave of customers and upgrades for a new device, like the iPhone X, which did not materialize in the past quarter. In Apple's first-quarter of 2018 earnings report, the company said it sold 77.3 million iPhone units, down 0.9% year-over-year, compared to analysts' estimates of 80.2 million units.

Some of the weakness in iPhone sales came from China, where the iPhone X has failed to woo consumers because it has been perceived as a smaller phone compared to its predecessors. 

But despite the slowdown in iPhone sales, Apple made a bigger profit this quarter from its installed base of users who bought additional hardware, software and services. Apple devices and accessories like the Apple Watch and AirPod grew 36% year-over-year, and its services segment grew 18.1% year-over-year.

"Not all is lost — the installed device bases are growing, loyalty is high, the iPhone is gaining share, and Apple is far ahead in wearables," Milunovich said.

Milunovich maintained his price target of $190 per share.

Read more about why some analysts think Apple can move past slow iPhone sales and onto making money with other things.

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SEE ALSO: Apple proves it can still deliver profit growth despite slower iPhone demand