Daryanani: Apple ASPs could 'wow' Wall Street

The iPhone's average selling price will continue to resist gravity, says analyst.

One of the secrets of the iPhone's extraordinary profit margins—perhaps the secret—is that the average selling price doesn't change much from year to year. Contrast that with Android:

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Can Apple keep it up? Investors are betting that they can't; it's one of the assumptions that keeps Apple's price-to-earnings ratio so low.

Conventional wisdom says that if iPhone ASPs haven't already headed south, they soon will. Indeed, the consensus on Wall Street, according to RBC analyst Amit Daryanani, is that iPhone prices fell 5% to 10% in the fiscal year that wrapped up last month.

But the Street may be in for a surprise, Daryanani told clients in a note issued early Friday. He expects ASPs to be flat or modestly up year over year. "Based on our recent iPhone 7 survey results," he wrote, "ASP’s could be the “wow’ factor this EPS season."

According to Daryanani, 71% of respondents in his survey were planning to buy the newest iPhone (compared with 56% last year) and 46% were looking at larger (and higher-margin) 5.5" phones, compared with 38% last year.

Earlier this week, two other Apple analysts offered new ASP estimates:

  • Canaccord Genuity's Michael Walkley: "We maintain our above-consensus ASP of $671 versus consensus of $654 as we believe iPhone 7 Plus is increasingly popular as a result of the dual camera system."
  • Credit Suisse’s Kulbinder Garcha: "We estimate ASPs of $632/$661 and iPhone GMs of 39.5%/40.5% for CY16/17."

We'll find out who was closest to the mark on Oct. 25, when Apple is scheduled to report its final quarterly earnings of fiscal 2016.

8 Comments

  1. George Providaked said:
    The dogma on Apple ASP dates back to 1998, when it also assumed ASP could not be sustained, remember Netbooks. Similarly, in iPod era, every year in iPhone era, as well as Apple Watch and iPad.

    Market fail to learn from history, and repeat their errors. Basically, the Market and analysts fail to understand Apple business model, strategy, and values.

    Apple has been upfront about this but the market and analysts remain in denial.

    This does not mean Apple may experience “failure,” but it is unlikely to be predicted by the markets and most analysts. A credible model of Apple is required and it will not be standard cookie cutter model applied from other tech or other classes of companies.

    When understanding comes, perhaps Apple’s success will be achieved by other companies.

    1
    October 7, 2016
  2. Fred Stein said:
    Apple is not resisting Newton’s law of gravity. Apple follows Moore’s law, with big investments in the chips and software at a rapid clip. That sustains their ASP.
    The competition cannot undercut them in price at comparable performance. Samsung’s current mess is partly due to them over-engineering a phone specifically to dethrone Apple. Alphabet’s Pixel is priced to the penny to match Apple.
    Actually Apple’s Revenue per iPhone may be increasing by adding services revenue.
    The iPhone SE with it’s new low price point should lower overall ASP. So the rest of the line-up must be doing very well.

    0
    October 7, 2016

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