Stephen Silver
Ahead of earnings, GBH Insights' Daniel Ives sees 42 million iPhones sold, and no big surprises — but predicts the real story is what Apple forecasts for 2019 demand.
In a note published Monday and seen by AppleInsider, Ives predicts that Apple will announced that it sold 42 million iPhones in the third quarter, and predicted "no major surprises" in regards to sales numbers or gross margins. Ives sees Apple's forecasts about the 2019 iPhone demand, as well services numbers, the "main event" of Apple's earnings announcement on Tuesday.
Reiterating a note of his from May, Ives continues to see the "window of opportunity" to upgrade over the next 12 to 18 months at 350 million, with Apple needing to capture the majority of those in order to ensure a successful cycle, which will in turn prop up services demand.
For that cycle, Ives is with the consensus of most analysts, who see Apple introducing three iPhones this fall- two 5.8 inch to 6.5 inch OLED Plus models, plus a less expensive LCD iPhone. Ives sees their releases as staggered between three and six months.
"In terms of the quarter, we believe there could be some upside on the all-important services/software front along with ASPs potentially another bright spot and top-line catalyst," Ives wrote in the note. "In a nutshell, the Street is all focused on the demand trajectory for the September quarter and most importantly into 2019 with the trifecta of next generation iPhones on the horizon and the Street modeling iPhone shipments of roughly 220 million units, which could ultimately prove to be conservative in our opinion given the underlying demand drivers."
The analyst maintains a $200 price target and the rating of "highly attractive" for Apple's stock.
Heading into Apple's earnings announcement, recent surveys of analyst projections published last week see Apple announcing that it sold around 42 million iPhones in the third quarter, and will announce EPS growth of about 37 percent. Gene Munster, for one, predicted 42 million iPhones sold and said that the iPhone is "becoming a stable business."
Various analysts, as they often due in the third quarter, have labeled the quarter boring or insignificant, as it is the last quarter before the arrival of new iPhones.
This earnings announcement has been very different from the runup to earnings in the second quarter, when many analysts predicted a disappointing quarter plagued by soft iPhone demand. Apple went on to quiet doubters by beating those estimates.
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15 Comments
Old habits are hard to break. Still it seems the analyst fixation on quarterly iPhone units is easing up a bit. That makes sense, if you can buy nearly 3 SE's for the price of one tricked out iPhone X. Ideally they should concentrate on "new converts" and average annual spend on ecosystem. Call it AASE. (For instance, I'm sitting out this year on major hardware. But probably spending over $300 on services/apps and maybe more than $400 on charging mat, AirPods/case, watch band. So even though a relatively idle year for me, Apple still reaping $$.) Of course how to model it is the problem, as no savvy tech company can be transparent, especially in nascent areas.
A lot of this depends on EXACTLY when Apple has these for sale. One week, plus or minus, can have the September quarter’s sales up, or down, by a couple of million units, either way, and the December quarter correspondingly following in the inverse.
so Apple could have this quarter look somewhat better by having them out slightly earlier (if production allows!) and the next quarter slightly worse. Since the next quarter is the blowout sales quarter, it might be better to eat a small number of sales by doing the adding this coming quarter.
I don't think 4th quarter estimates are going to tell much. You'll have only a week's worth of sales included if the phone is released on September 21. Even under the best of circumstances the wait time for orders will slip past the end of the quarter shortly after preorders open up.
Apple will sell all it can make through September, but it won't be until Q1 2019 estimates come out at the first of November that we get a true idea of the long-term demand.
Daniel Ives will be disappointed then. There will be no meaningful data or predictions from Apple about 2019.