Apple watchers wary amid indicators of 'peak iPhone'

Ask Siri if iPhone 7 will be the answer to Apple's problems, and you're told that a visit to Apple's website should answer that question "and more".

If only it was that easy.

Apple's shares closed down 6.3 percent at US$97.82 on Wednesday, wiping off about $36 billion in market value, a day after the company reported its first-ever fall in smartphone sales, arousing talk of "peak iPhone".

For many analysts, the company's immediate future rests with iPhone 7, which Apple is expected to launch in September.

"If iPhone 7 doesn't surprise with meaningful new useful features, we worry that consumers won't upgrade," Macquarie analyst Ben Schachter wrote in a note to clients.

"And unfortunately, nothing that we've seen about iPhone 7 thus far strikes us as particularly innovative," said Schachter, who cut his price target to US$112 from US$117 while maintaining his "outperform" rating on the stock.

The iPhone 7 is expected to sport a new look with features such as waterproofing, wireless headphones and force touch as the home button.

But many wonder if that will be enough to entice users to dump their existing iPhones or switch from the Android-based phones that have come to dominate the smartphone market.

Goldman Sachs removed Apple from its conviction list after Apple's results and said it expected the company's shares to remain weak until the market gets more comfortable with the prospects for iPhone 7.

Goldman was among at least 16 brokerages that cut price outlooks on Apple's stock, cutting its target to US$136 from US$155 while retaining a "buy" rating.

Of the 46 analysts covering the stock, 36 rate it "buy" or "strong buy" or the equivalent. The median price target is US$121, according to Reuters data.

Apple usually launches new iPhones in September and sells the most devices in the December quarter.

Unit sales typically drop over the next few quarters, picking up after the next iPhone launch.

Along with the weaker-than-expected iPhone sales, Apple reported its first drop in revenue in a decade. Sales in China, the company's most important market after the United States, fell 26 percent.

Apple also forecast another disappointing quarter for sales.

Piper Jaffray's Gene Munster said that while there were few bright spots in Apple's report, he believed Apple's shares would rebound in 2016 as iPhone sales start to grow again in the fourth quarter.

Still, there was a bigger question about the iPhone's longer-term growth and other factors that can drive revenue, he wrote. "That question remains unanswered after the March report."

Reporting by Tenzin Pema and Supantha Mukherjee in Bengaluru; Additional reporting by Subrat Patnaik; Editing by Ted Kerr and Robin Paxton