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'iPhone 8' production problems force late shipments, but little impact on Apple stock, analyst says

If the so-called "iPhone 8" does not ship by the end of the third quarter, pent-up demand will only increase the subsequent holiday quarter's sales, rather than hurting Apple, one analyst believes.

Render of the 'iPhone 8' based on a CAD file, via Engadget

Render of the 'iPhone 8' based on a CAD file, via Engadget


Timothy Arcuri from Cowen & Company issued a note to investors on Wednesday saying Apple is still working on increasing yields of the AuthenTec Touch ID solution embedded in the screen of the "iPhone 8" —and that will hold up mass production somewhat. Arcuri believes that yield issues in the Touch ID solution, plus possible issues with the layered motherboard on the "iPhone 8" will push mass production from a "normal" July or August timeframe to October or November.

As a result, the analyst expects that iPhone shipments in Apple's fourth financial quarter will be lower than Wall Street's predictions of about 47 million, and will hit about 44 million. On the other hand, the delay in availability will push the holiday quarter's iPhone sales up to about 90 million, and Arcuri believes that Wall Street's estimates for fiscal year 2018 sales are "way too low."

Even with lowered sales predictions because of no "iPhone 8" in the quarter, the average selling price of iPhones in Apple's fourth fiscal quarter should rise year-over-year. Arcuri expects average selling price to climb in the quarter to a "conservative" $626, up slightly from 2016 even without any sales contribution from the "iPhone 8."

Arcuri still believes that investors aren't giving Apple's Services segment enough credit for Apple's earnings. Should that change, impact from seasonal sales variations wouldn't hit the stock so hard, and the stock could hit $175 in 2017.

In 2016, the iPhone 7 started shipping in the middle of September, with pre-orders arriving and limited retail stock hitting on September 16. Supplies of the iPhone 7 Plus remained constrained into the first calendar quarter of 2017. However, the vast majority of Apple's iPhone 7 family sales were in the holiday quarter, and not in the ending days of Apple's fourth fiscal quarter of 2016.

The "iPhone 8" is predicted to sport an edge-to-edge OLED panel with a 5.1-inch user space — the rest dedicated to virtual buttons. Slimming or removing the bezels would allow Apple to cram a larger battery into a form factor similar in size to the 4.7-inch iPhone 7. Also expected is a new 3D facial scanner .

With a complete redesign, plus the inclusion of a 2.5D curved glass back with wireless charging, some reports have pegged the starting price of the "iPhone 8" at more than $1,000.