Apple iPhone shoppers continue to gravitate to less expensive, older model handsets as opposed to the company's pricey new handsets. As a result, Apple (AAPL) has boosted production of iPhone 7 and 8 models while trimming orders for iPhone XS series handsets, an investment bank said Wednesday.
XThe trend is pressuring Apple's average selling prices, which the company stopped reporting with its fiscal first quarter ended Dec. 29.
UBS analyst Timothy Arcuri estimates the average selling price for an iPhone this quarter will be $687, down 5% year over year. He lowered his estimate from his prior target of $711. Because of this change, he cut his iPhone revenue forecast to $29.2 billion from $30.2 billion in the March quarter.
Based on recent supply-chain surveys, UBS believes Apple will build about 40 million iPhone units in the March-ending quarter. That's unchanged from the firm's last report, but the product mix is shifting to lower-priced iPhones, Arcuri said.
Apple iPhone Production Shifts To Older Models
Apple has increased production of the year-old iPhone 8 and two-year-old iPhone 7 in the current quarter by a combined 5 million units. Meanwhile, it is lowering its production of current-generation models by the same amount, Arcuri said.
Apple's 12th-generation iPhones are its most expensive smartphones yet. Introduced in September, the iPhone XS Max, XS and XR are priced starting at $1,099, $999 and $749, respectively. The prior year's iPhone X, 8 Plus, and 8 lineup started at $999, $799 and $699.
Apple kept two older models in its handset lineup at lower prices. The iPhone 7 now starts at $449 and the iPhone 8 starts at $599.
"While March (quarter) mix is still bad, the tone in the supply chain is starting to improve," Arcuri said in a note to clients.
Increased Sales Estimate
For the June quarter, he increased his estimate for iPhone sales to 34.5 million units from 32.5 million. However, the increase is based entirely on more older model iPhone units being sold, he said.
Arcuri thinks the iPhone average selling price will fall to $655 in the June quarter, vs. his prior target of $683.
Arcuri reiterated his buy rating on Apple stock with a 12-month price target of 185. Apple stock rose 0.3% to 174.87 on the stock market today.
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