Bearish analyst fears weak iPhone XS & iPhone XR sales, but still expects ASP to climb

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in iPhone
Preorders for the iPhone XR are better than the equivalents for the iPhone XS and iPhone XS Max, according to Rosenblatt Securities' Jun Zhang, but that hasn't stopped the analyst from reducing expectations for the value-oriented iPhone release.




In a note received by AppleInsider, the iPhone XR is believed to have preorders of "less than or equal to 12 million units," based on a one-week wait time in China and no wait time in other major markets. In the firm's September 17 note, the combined pre-orders for the iPhone XS and iPhone XS Max were around 10 million in the first three days.

After just one day of preorders, Zhang believes the initial sales of the iPhone XR are weaker than previous expectations, with 12 million units thought to be shipped to retail channels before October 26. Shipment estimates for the iPhone XR are also down overall for the second half of the year, reducing from 50 million units to 46 million.

It is suggested that, while the iPhone XS and iPhone XS Max preorders have been generally stronger in the United States than in China, the revers has occurred for the iPhone XR, with tracked preorder data indicating approximately 2 million units in the first three days. The iPhone XR preorders are apparently similar to the iPhone 8 and 8 Plus preorders from last year, and higher than the 1.5 million iPhone XS and XS Max preorders.

"This is not a very exciting result," muses Zhang, continuing that there is the belief iPhone XR demand will be lower, prompting Apple to reduce its iPhone XR production for November and December by about 3 million to 4 million units.

Zhang is also cautious on iPhone XS sales for the second half of the year, with no anticipated changes to production ahead of the holiday season, though weak sell-through data leads to expectations some production reduction will occur during the holiday season of around 4 million to 5 million units. Shipments of the iPhone XS continue to be at 15 million for the firm.

The iPhone XS Max's production is believed to have increased by 2 to 3 million units for the fourth quarter, to build up inventory for holiday sales, though a sell-through cool down is apparently occurring in China as consumers wait for the iPhone XR. Previous second half of 2018 estimates have increased from 15 million units shipped to 17.5 million.

For the Average Selling Price (ASP), Zhang suggests it will rise by $80 year-on-year, citing a production increase for the iPhone 7 and iPhone 7 Plus that apparently caused a lower ASP for the second half of 2017. It is also suggested the higher-capacity 512GB models will account for between 40 and 50 percent of total new model sales in 2018, further bumping the ASP upwards.

It isn't clear why Zhang believes that the iPhone 7 is gone, as it is still available in the product lineup. The iPhone 8 in the 2018 refresh is taking the place that the iPhone 7 occupied with the iPhone X launched.

The iPad Pro is believed will ramp up in October, with iPad increasing its ASP. A new design of iPad Pro, anticipated to be revealed later this month as part of an Apple special event, is tipped to help drive the new iPad upgrade cycle.

Little is said about the Apple Watch, except that sales "continue to be strong," which will help with fourth quarter guidance.

For Apple's quarterly earnings report on November 1, Zhang believes the revenue and earnings will be in line with forecasted figures of $61 billion and $2.65 EPS, with guide figures for the next quarter in line or slightly better than the firm's own predictions of $91.2 billion and $4.71 caused by new product releases and a higher ASP.

While Zhang's comments are in line with some other analysts with regard to the iPhone XR's demand, such as those made by Loup Ventures' Gene Munster on Friday, Rosenblatt's analysis of Apple's supply chain and sales lie generally on the pessimistic side of the analyst pool. AppleInsider's Daniel Eran Dilger has previously highlighted issues with Rosenblatt's predictions relating to the iPhone, including proclamations about the iPhone X that turned out to be wrong.

Rosenblatt rates Apple's shares as "Buy," with a price target of $200. At the time of publication, AAPL is currently at $219. Rosenblatt's target price has lagged behind Apple's actual price for the last four years, with the analyst increasing the price over time -- but never to where the stock is at that point.

AppleInsider will be at the fall "There's more in the making" event, where we expect new iPad Pros, and maybe even new Macs! Keep up with our coverage by downloading the AppleInsider app for iOS, and follow us on YouTube, Twitter @appleinsider and Facebook for live, late-breaking coverage. You can also check out our official Instagram account for exclusive photos.

Comments

  • Reply 1 of 11
    Ridiculous.

    This is one of Apple's best new product lineups ever!

    They're gonna sell like hotcakes!!!
    edited October 2018 jbdragon
  • Reply 2 of 11
    lkrupplkrupp Posts: 7,094member
    Okay, this will be my last comment on any AI article involving what some analyst says about Apple (good or bad). I know speculation about Apple’s future success or failure has become a cottage industry but in the grand scheme of what’s really important news about Apple, analyst's crystal balls are at the bottom of the list. Maybe of enough of us start ignoring these reports (again, good or bad) editors will stop publishing them. IF I want speculation I’ll go visit a financial website.
    jony0
  • Reply 3 of 11
    Where is he getting these numbers from and whose expectations are they allegedly below?
    jbdragon
  • Reply 4 of 11
    Of course. At least they're consistent.
    jbdragon
  • Reply 5 of 11
    Where is he getting these numbers from and whose expectations are they allegedly below?
    One stinking day of pre-orders and they think they've spotted some trend. Idiots. A few analysts are basing their conclusions on iPhone availability. When they see that certain units aren't being sold out, they quickly assume that demand is poor instead of thinking Apple simply has more units in stock. These analysts can't seem to wait a week or two before making judgment calls. They figure iPhone sales always run like clockwork and aren't affected by any outside influences. They see that iPhone queues are shorter than maybe last year and so they say that consumers are no longer excited about the newest iPhones. I think they MIGHT be jumping to false conclusions to fit their own bearish agendas. This analyst uses the term 'weak' but 'weak' compared to what or to whose expectations? As a shareholder, I want to see actual figures and for that I need to wait for Apple's quarterly financial results.
    jbdragon
  • Reply 6 of 11
    Mike WuertheleMike Wuerthele Posts: 4,604administrator
    lkrupp said:
    Okay, this will be my last comment on any AI article involving what some analyst says about Apple (good or bad). I know speculation about Apple’s future success or failure has become a cottage industry but in the grand scheme of what’s really important news about Apple, analyst's crystal balls are at the bottom of the list. Maybe of enough of us start ignoring these reports (again, good or bad) editors will stop publishing them. IF I want speculation I’ll go visit a financial website.
    We have far more requests for coverage of them, than we have complaints that we have.
    muthuk_vanalingamfastasleep
  • Reply 7 of 11
    Is it just me, or do these negative predictions regularly occur right before earnings are reported?
    muthuk_vanalingam
  • Reply 8 of 11
    radarthekatradarthekat Posts: 3,055moderator
    Such detailed numbers from people tossing chicken bones.
    jony0
  • Reply 9 of 11
    maestro64maestro64 Posts: 4,569member
    lkrupp said:
    Okay, this will be my last comment on any AI article involving what some analyst says about Apple (good or bad). I know speculation about Apple’s future success or failure has become a cottage industry but in the grand scheme of what’s really important news about Apple, analyst's crystal balls are at the bottom of the list. Maybe of enough of us start ignoring these reports (again, good or bad) editors will stop publishing them. IF I want speculation I’ll go visit a financial website.
    ah come on it gives everyone something to complain about, plus these analysis are hedging in both directions for once, units sales will be down but ASP up so profits are up, This way they look like they got it right. remember apple never breaks down the numbers so if apple unit number stay the same and profits are down they get to blame it on no one buy the XS products, if unit numbers are down and ASP are up, they can say Apple actually sold more XS products than other product so they made more.


    But its always good to know the BS being spread around since we know the market will react to the BS and if you know this you can make money off the ups and down. Investing on perception sometimes is more profitable than reality.
  • Reply 10 of 11
    avon b7avon b7 Posts: 3,796member
    It's far too early to tell.

    If I were in the market for one of these I would be buying for my wife and giving it as a Christmas present. I definitely wouldn't be buying right off the bat. I'm sure many people will be following the same strategy.

    If I were doubting between an iPhone and something else I'd hold off until Black Friday to see if anything else on my list saw a nice discount. Again, I'm sure many people will find themselves in a similar situation.
  • Reply 11 of 11
    chasmchasm Posts: 1,544member
    This guy, in particular, has a long track record of being wrong. Kudos for noting this in the article, but when someone can’t even get their target price right across more than four years, I’d say to stop giving them the oxygen of free press. You can be an analyst who is cautious on AAPL without being completely off the beam; we see that every quarter. Let’s focus on the sizable pool of reputable analysts, rather than quacks, incompetents, and manipulators.
    scribe1964
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