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Morgan Stanley analyst Katy Hubert and the team's internal models now show "weaker iPhone shipments as buyers start anticipating new iPhones," they wrote in the note.
"We lower iPhone revenue estimates in fiscal 2017 by 3% to reflect weak demand ahead of the supercycle," Huberty writes.
The "supercycle" is an Apple investment thesis that is now widely discussed by Wall Street analysts. The theory goes that since the iPhone 6S and 7 have had lackluster sales growth, and most people upgrade their smartphone every two or three years, then there is a large group of iPhone users waiting for a new model to upgrade.
But Huberty believes that anticipation for the iPhone 8 may mute iPhone 7 sales over the next two quarters.
"We expect March guidance below consensus," she writes, although Morgan Stanley still deems Apple a "top pick." Huberty's model predicts a return to strong 20% sales growth for the iPhone in 2018.
Apple stock was up less than 1% in mid-day trading. Morgan Stanley gives Apple an "overweight" rating and a price target of $148.
Apple has faced three straight quarters of revenue declines. The quarter ending in December is usually Apple's largest by far, thanks to holiday shoppers. Apple reports its holiday quarter earnings on January 31.
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