USB’s Apple analyst, Steve Milunovich, latest Evidence Lab iPhone Monitor and the Consumer Intelligence Research Partners (CIRP) surveys indicate strong demand for Apple’s iPhone in the September quarter and Average Selling Prices (ASPs) that are higher than last quarter, respectively. If both of these are accurate or even if only one of them is than Apple’s results on Tuesday could surprise to the upside. (Note that I own Apple shares).
UBS survey indicates demand for 55 million iPhones
This is the fourth quarter that Steve Milunovich at UBS has been conducting the firm’s Evidence Lab iPhone survey. Except for the December 2014 quarter when the survey results were below the iPhones actual sales for the past two quarters the survey has overstated sales between 1.9 and 3.2 million units.
For this quarter the survey initially started with a demand of 53.9 million units in August, it fell to 52.8 million in September and bumped up to 55 million in October. Two indications iPhone demand could be stronger than expected are the almost double trade-in request experienced by Gazelle around the iPhone 6s launch and China Mobile’s continued strong 4G rollout. Milunovich is using 50 million iPhones to estimate Apple’s total revenue and EPS, which provides some cushion if the survey is too high again. The average Street estimate is about 49 million units which is also the result I have forecast.
iPhone 6s models are a lower percentage at launch than the iPhone 6
CIRP measures Apple’s US iPhone sales by model and memory size. In its September quarter findings it found that the iPhone 6s models were 24% of total iPhone sales (16% 6s’ and 8% 6s Plus’) vs. 45% for the iPhone 6 models a year ago (32% 6’s and 13% 6 Plus’). Part of the reason the 6s models being a lower percentage is that they only had 2 selling days in the quarter vs. the 6’s having 9 days last year.
The demand for the 6 vs. 6 Plus models has varied during the past year. It has fluctuated from the 6 being 2.5x more popular than the 6 Plus in the September 2014 quarter to 1.5x in the December quarter, back up to 2.6x in the March quarter, back down to 1.8x in the June quarter and finally 2.1x in the September 2015 quarter. It is hard to discern a trend in this result.
iPhone’s ASP may be its highest ever
CIRP measures the US Weighted Average Retail Price (WARP) for Apple’s iPhones. This is the first time it has made the number public and it tracks fairly closely to what Apple reports for its overall ASP. For the past five reported quarters CIRP’s WARP has ranged from being 103% to 114% higher than Apple’s ASP.
- June 2014: WARP of $641, 13% higher than Apple’s $561
- September 2014: WARP of $623, 3% higher
- December 2014: WARP of $707, 3% higher
- March 2015: WARP of $702, 7% higher
- June 2015: WARP of $712, 8% higher
For the September 2015 quarter CIRP estimates that Apple’s US WARP is $718 which is 1% higher than last quarter and up 15% year over year. If the ratio from the March and June quarters apply to the iPhone’s ASP in the September quarter than it could come in around $665 to $670.
I believe that a large portion of analysts are expecting the iPhone’s ASP to decline from June’s $660 for the September quarter since the iPhone 6 and 6 Plus prices were cut by $100 when the iPhone 6s and 6s Plus became available. For every $10 delta in Apple’s iPhone ASP it adds about $500 million in revenue and $0.02 in EPS.
Milunovich is above the Street with his revenue and EPS estimates
Milunovich is expecting Apple to report $52.9 billion in revenue vs. guidance of $49-$51 billion, the Street at $51.1 billion and my projection of $51.5 billion.
He is forecasting Apple to generate EPS of $2.02 vs. implied guidance of $1.73 to $1.87, the Street at $1.88 and my $1.92.
While Apple’s guidance will have a lot of influence on how the stock trades on Wednesday if Apple can hit Milunovich’s numbers and guidance is at least in-line with expectations the shares could continue to rally.
