Unexpected success of iPhone SE predicted to drop Apple's average selling price to $637

Posted:
in AAPL Investors edited July 2016
A new survey has suggested 16 percent of U.S. iPhone sales in the June quarter were of the low-end iPhone SE -- a number that investment firm UBS believes will push down the average selling price of the iPhone more than expected.




Analyst Steven Milunovich of UBS issued a note to investors on Tuesday, a copy of which was provided to AppleInsider, revealing the results of a 500-person survey conducted in the U.S. by Consumer Intelligence Research Partners. It found that about 9 percent of domestic iPhone sales were of the 64-gigabyte SE model, while another 7 percent came in the 16-gigabyte capacity.

At an estimated 16 percent of total sales for the June quarter, Milunovich said the iPhone SE is outperforming his expectations. But the analyst told investors that he believes the success will have a detrimental effect on Apple's bottom line, dragging down the average selling price of its most profitable product.

Milunovich's latest estimates call for the iPhone ASP to drop to $637 --?a number he believes is well below Wall Street consensus of about $660.

Another potential factor he cited, as evidenced by the CIRP survey, is capacity. The poll found that the average storage per new phone purchased was down by about 10 percent year over year, which will also affect ASPs.

"A lower ASP is likely due to the success of the SE, most of the channel inventory reduction being 6s, and fewer storage upgrades," Milunovich wrote.

Despite his negative outlook, Milunovich has still maintained a "buy" rating for shares of AAPL, as well as a price target of $115. He believes any struggles seen by Apple will be short-term -- UBS's forecasts call for iPhone sales to stabilize in fiscal year 2017, and grow 15 percent in fiscal 2018.
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Comments

  • Reply 1 of 35
    rob53rob53 Posts: 1,840member
    Sell more iPhones, stock tanks. Go figure. These anal ysts are never satisfied.
    TurboPGTmike1mcarlingjony0baconstangration alRacerhomieX
  • Reply 2 of 35
    I hope they don't just take this as customers want cheaper phones. Me and several of my colleagues just didn't like the trend of big ridiculous phones. I traded my 6 in for the SE because I hated the size and the power button on the side was a deal breaker. I want an "Air" like option, a truly updated form factor with all of the modern components. The SE has everything I want, but just wish it was thinner and had force touch. I would pay $600 + for that.
    rare commentcaliDeelrondachardouglas baileymcarlingjony0RacerhomieX
  • Reply 3 of 35
    I hope they don't just take this as customers want cheaper phones. Me and several of my colleagues just didn't like the trend of big ridiculous phones. I traded my 6 in for the SE because I hated the size and the power button on the side was a deal breaker. I want an "Air" like option, a truly updated form factor with all of the modern components. The SE has everything I want, but just wish it was thinner and had force touch. I would pay $600 + for that.
    Fully agree with this and think that, going forward, the smallest form factor will continue to have the latest processor and, as soon as they can, the latest features (force touch, etc.). So the idea that there will be only two updated phones this fall seems wrong - the SE is not a second-tier phone, it is just the smallest form factor of the current technology as much as is feasible. When the 7 (or 6SE, or whatever) comes out, the 5SE (or whatever new name it has) will also get the latest A series processor. FWIW, I also bought an SE because I wanted the smaller size and better battery. And, moreover, this accelerated my upgrade cycle whereas I would normally have waited until the fall for the next phone to update my 6. Anything that helps smooth the blockbuster release cycle must be helpful as the logistic hurdles on the iPhone releases must be killer.
    edited July 2016 caliDeelronpscooter63mcarlingbaconstang
  • Reply 4 of 35
    apple ][apple ][ Posts: 8,360member
    Unexpected?

    Only to the clueless perhaps. Why are analysts so clueless?

    I've been saying since day one that the SE would sell a whole lot. That was obvious to anybody with a clue.
    caliTurboPGTmike1Deelrondacharpscooter63mcarlinglatifbpbaconstangdysamoria
  • Reply 5 of 35
    Don't know why people listen and pay this analyst highly educated / experience but can't do simple math. Profit not ASP matters. If AAPL can maintain its profit margin with SE(cost less to make vs 6/6s) who cares about ASP. Most importantly, it is selling more iPhones into the Eco system which add $$ for services i.e Apple Pay,etc
    Deelrondachardouglas baileymcarlingjony0baconstangnolamacguyration al
  • Reply 6 of 35
    TurboPGTTurboPGT Posts: 355member
    apple ][ said:
    Unexpected?

    Only to the clueless perhaps. Why are analysts so clueless?

    I've been saying since day one that the SE would sell a whole lot. That was obvious to anybody with a clue.
    Its almost as if Apple knows what they're doing and releases products that sell.
    anomeDeelrondachardouglas baileyfastasleeppscooter63jony0baconstangbrucemcdysamoria
  • Reply 7 of 35
    teejay2012teejay2012 Posts: 272member
    Gross margins and volumes are likely more important that average selling price here. Milunovich wants AAPL to move one way or the other (to make money) - thus the 'negative... but buy' message from him. AAPL analysts play the same broken record, over and over. Why does anyone listen?
    mcarling
  • Reply 8 of 35
    profprof Posts: 73member
    apple ][ said:
    Unexpected?

    Only to the clueless perhaps. Why are analysts so clueless?

    I've been saying since day one that the SE would sell a whole lot. That was obvious to anybody with a clue.
    Yeah, I also don't get it. Only because some -- admittedly loud -- people have size complexes and require compensation doesn't mean everyone appreciates ridiculously big phones. Okay, Apple actually wanted to get into the lower price segment, but actually I do think people would actually pay a premium for a highest end small iPhone -- I certainly would.
    mcarlingbaconstangdysamoria
  • Reply 9 of 35
    rwesrwes Posts: 151member
    I hope they don't just take this as customers want cheaper phones. Me and several of my colleagues just didn't like the trend of big ridiculous phones. I traded my 6 in for the SE because I hated the size and the power button on the side was a deal breaker. I want an "Air" like option, a truly updated form factor with all of the modern components. The SE has everything I want, but just wish it was thinner and had force touch. I would pay $600 + for that.
    Fully agree with this and think that, going forward, the smallest form factor will continue to have the latest processor and, as soon as they can, the latest features (force touch, etc.). So the idea that there will be only two updated phones this fall seems wrong - the SE is not a second-tier phone, it is just the smallest form factor of the current technology as much as is feasible. When the 7 (or 6SE, or whatever) comes out, the 5SE (or whatever new name it has) will also get the latest A series processor. FWIW, I also bought an SE because I wanted the smaller size and better battery. And, moreover, this accelerated my upgrade cycle whereas I would normally have waited until the fall for the next phone to update my 6. Anything that helps smooth the blockbuster release cycle must be helpful as the logistic hurdles on the iPhone releases must be killer.
    I love my SE - and even after using the 6 for over a year. I too was only disappointed by the lack of 3D Touch and the updated front facing camera, not that I take that many selfies.

    Frequently on wi-fi, so didn't mind the lack of LTE radio advancements, personally and second gen Touch ID sensor (for speed) would have been nice, but first gen works fine!

    Got the 64 GB myself and I agree; would have paid more for it if it included the other updated components.

    Maybe now that Apple has (possibly) seen the demand for the 4" form factor, we'll see a refresh sooner than later!
    edited July 2016 mcarlingbaconstangdysamoria
  • Reply 10 of 35
    TurboPGTTurboPGT Posts: 355member

    I hope they don't just take this as customers want cheaper phones. Me and several of my colleagues just didn't like the trend of big ridiculous phones. I traded my 6 in for the SE because I hated the size and the power button on the side was a deal breaker. I want an "Air" like option, a truly updated form factor with all of the modern components. The SE has everything I want, but just wish it was thinner and had force touch. I would pay $600 + for that.
    Fully agree with this and think that, going forward, the smallest form factor will continue to have the latest processor and, as soon as they can, the latest features (force touch, etc.). So the idea that there will be only two updated phones this fall seems wrong - the SE is not a second-tier phone, it is just the smallest form factor of the current technology as much as is feasible. When the 7 (or 6SE, or whatever) comes out, the 5SE (or whatever new name it has) will also get the latest A series processor. FWIW, I also bought an SE because I wanted the smaller size and better battery. And, moreover, this accelerated my upgrade cycle whereas I would normally have waited until the fall for the next phone to update my 6. Anything that helps smooth the blockbuster release cycle must be helpful as the logistic hurdles on the iPhone releases must be killer.
    You're a little off the mark. The SE will remain a compelling offer in the lineup, but not too compelling. It will not get an update this fall, and won't be updated any sooner than next March.
    Apple cannot afford to update their lowest price tier at the same time as the highest priced tier. They simply don't do this. Not with iPhone, nor iPad, nor any product. Apple will release the iPhone 7 and 7 Plus...if you want the latest and greatest, you have to pay for it. If size is more important to you than features, than you'll have to settle for SE, or wait for that product to finish its own separate upgrade cycle.
    stanthemanlatifbpbrucemc
  • Reply 11 of 35
    calicali Posts: 3,495member
    apple ][ said:
    Unexpected?

    Only to the clueless perhaps. Why are analysts so clueless?

    I've been saying since day one that the SE would sell a whole lot. That was obvious to anybody with a clue.
    It was obvious. The market for that screen size is huge and open(though I do remember the moronic "no one wants a small phone!!!" Critics)
    I think it would have sold more if it had a wide range of colors like the 5C and iPod Nanos.

    I've been rooting for a slim iPod touch sized iPhone for years, even before the rumors started.
    example:



    I hope they don't just take this as customers want cheaper phones. Me and several of my colleagues just didn't like the trend of big ridiculous phones. I traded my 6 in for the SE because I hated the size and the power button on the side was a deal breaker. I want an "Air" like option, a truly updated form factor with all of the modern components. The SE has everything I want, but just wish it was thinner and had force touch. I would pay $600 + for that.
    It's not a "cheap" phone. The size is what lowers the price dramatically. It should have all the latest features being released mid-cycle but at the same time I feel like maybe Force Touch wasn't compatible with the screen size and hopefully they fix this.
    edited July 2016
  • Reply 12 of 35
    mtbnutmtbnut Posts: 185member
    Well, it was a good run. It's now over for Apple.
    jackansibaconstang
  • Reply 13 of 35
    apple ][apple ][ Posts: 8,360member
    cali said:

    I've been rooting for a slim iPod touch sized iPhone for years, even before the rumors started.
    example:
    I've been rooting for a small phone for a long time too. I even mentioned an iPhone Nano many years ago.

    When Apple finally did release the SE, I put my money where my mouth was, and I recently bought one.

    I could have obviously gotten a larger iPhone, like the 6s+, but I just wasn't interested. It's too large for me. A female friend of mine has one, and she keeps it in their purse. I do not carry any purse or any ridiculous man purse.

    I just want a small Apple phone that comfortably fits in my front pocket, that is also powerful and awesome, and the SE fits the bill for me, and for many others too obviously.

    I knew that the SE was selling like crazy, because I had been following it since first released, because I was trying to buy one, and it was virtually impossible to buy at any retail Apple store in my area. I was checking the stock often, and finally last week, it showed up as in stock in a couple of Apple stores nearby, so I immediately went and got one. :#  

    It took many months to get one, and that right there is a pretty good clue for anybody you'd think. I am not the least bit surprised that analysts failed to pick up on this huge and obvious clue, staring them straight in the face.
    pscooter63baconstang
  • Reply 14 of 35
    sflocalsflocal Posts: 4,078member
    My iP6+ was offline for a couple days due to a hardware issue (now resolved) and in the meantime I put the SIM card into my old like-new iPhone5.  I got to tell ya, it was so nice using my smaller phone again.  While I like the larger screen, I just loved going back to the more convenient smaller factor.

    I'm waiting to see what the iP7 comes out with, but I'm considering going to the SE if the iP7 doesn't have something similar.  

    It is ironic, people bitch about Apple not selling "low-end" phones, they they do with the SE, and now people complain that they're selling low-end phones making the stock tank.  Whiners.
    baconstang
  • Reply 15 of 35
    anomeanome Posts: 941member
    TurboPGT said:
    apple ][ said:
    Unexpected?

    Only to the clueless perhaps. Why are analysts so clueless?

    I've been saying since day one that the SE would sell a whole lot. That was obvious to anybody with a clue.
    Its almost as if Apple knows what they're doing and releases products that sell.


    Never would have happened if Steve were still alive...

    No, hang on I'm doing it wrong...

  • Reply 16 of 35
    mike1mike1 Posts: 1,619member
    Or, they are incremental sales to people who wouldn't have upgraded to a larger phone until they absolutely had no choice.
    dysamoria
  • Reply 17 of 35
    yojimbo007yojimbo007 Posts: 850member
    Unexpected?,, by whom?
    baconstangdysamoria
  • Reply 18 of 35
    This shows the demand for the 4" size. I'm still hoping for a 4" high end phone with all the latest enhancements. I still have my 5 as a backup camera and every time I use it I'm reminded how I still love that form factor. The SE was close but I'm looking for that 4" iPhone 7. Screen size is nice but not at the detriment of usability (for me at least). 
    baconstang
  • Reply 19 of 35
    jungmarkjungmark Posts: 6,532member
    Gotta love analysts. For years they've been demanding a cheaper iPhone to "improve" Apple's position. They get it and now complain it's lowering the ASP. 
    baconstangdysamoria
  • Reply 20 of 35
    After using a 6 for 18 months I jumped for the SE on day one and haven't regretted it at all.

    I presume Apple profit margin on the SE will be strong considering how many parts had be designed long ago and had been in production for many years already. (E.g. Screen and casing).

    But, even Apple seemed surprised by its sales so I don't expect they would have time to add a 4" to the iPhone 7 line up. 

    If the 4" joins the same cycle as the other sizes, I expect it will be when the 7S' come out. 18 months after the SE release.
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