Apple’s stock took a hit this past week falling from $178.46 to $171.51. The $7 drop, or 4%, was in contrast to the NASDAQ increasing from 7,336 to 7,506, or over 2%, closing at an all-time high. There were multiple sell-side analysts coming out with concerns about the iPhone X’s demand in the March quarter, which will essentially be disclosed in Apple’s announcement on Thursday, February 1. Since some sales for the X probably spilled into the March quarter, this could provide support to the company’s revenue guidance. (Note that I own Apple shares and have sold Put options).
It has now been 12 weeks since the iPhone X became available
I have been tracking the X’s lead-times in seven countries (US, Canada, China, France, Germany, Japan and Great Britain) and 43 Apple stores in the Dallas, Minneapolis, New York City and Palo Alto areas for the past seven weeks to get a read on how well supply is catching up to demand. Given that Apple launched the iPhone 8, 8 Plus and X in 57 countries the company and its suppliers have done a very good job ramping production.
iPhone X lead-times vs. the iPhone 6 and 6 Plus
Probably the best iPhone launch to compare the X to is the 6 and 6 Plus since they introduced major functionality increases. While the 6’s became available in September vs. the X in November, the X has been selling long enough to compare the two.
The X’s current lead-times
- U.S. website delivery is at 4 days
- France and Germany are at 4 days
- Japan is at 2 days
- Canada, China and Great Britain are showing In Stock
At the same 12 week mark the iPhone 6 and 6 Plus had these lead-times
- U.S. and Canada websites had 3 to 5 days or 7 to 10 days depending on the configuration
- France, Germany and Great Britain had 3 to 5 days
- China was at 3 to 5 days or 5 to 7 days
- Hong Kong and Japan were not available to be ordered
While the iPhone 6 and 6 Pluses lead-times were a bit longer than the X’s at the same time, it does appear that demand for the X remains strong.
Very good in-store availability for the X but still not fully stocked
By entering the zip codes for Dallas, Minneapolis, New York City and Palo Alto it shows which stores have stock in the various carrier, color and memory size configurations but not how many. This provides 688 data points that give an indication on how well supply is catching up to demand. For the past four weeks the stores have had 99% of the combinations showing in-stock. This is very good, but I would expect it to be 100% when supply has caught up to demand.
December to March quarter revenue seasonality
To get a feeling for what revenue guidance Apple could give for the March 2018 quarter it is worthwhile to look at previous years. Below are the actual revenue declines from the December to March quarters for the past five years and the published sell-side estimates for the recently finished December 2017 and current March quarters.
- December 2012 to March 2013: Decline of 20%
- December 2013 to March 2014: Decline of 21%
- December 2014 to March 2015: Decline of 22% (iPhone 6 & 6 Plus)
- December 2015 to March 2016: Decline of 33%
- December 2016 to March 2017: Decline of 32%
Sell-side projections
- December 2017 to March 2018: Decline of 22%
It makes sense to be concerned that Apple’s revenue guidance next week could be below analyst’s projections, since seasonality would have to revert back to what it was a few years ago. However iPhone 8 and 8 Plus sales and the blended iPhone’s ASP, or average selling price, should provide support to the company’s revenue guidance.
