An October transition from iPhone 8 to iPhone X was part of Apple’s plan, says Raymond James’ Tavis McCourt.
From a note to clients that landed in my inbox Thursday:
Thoughts On Media Speculation on iPhone 8/Plus Cuts: Although Wall Street wants answers, the uncomfortable truth is that no one, not even Apple, knows exactly what the demand will be like for this iPhone cycle. We do know that Apple’s production plans included manufacturing a disproportionate amount of 8/8 Plus in August-October, and then transitioning production to the iPhone X. Therefore, news stories that indicate iPhone 8/8 Plus production is being cut, are simply not meaningful to understanding iPhone demand in totality.
Based on Verizon results and a few other data points, we suspect iPhone 8/8Plus demand globally is probably ~30% lower than the iPhone 7. Whether this is great or horrible is unknown yet, because no one knows what the demand for the X will be. However, we would say demand levels we are seeing with the 8/8 Plus appear consistent with our assumptions, which assume a ~60/40 split between iPhone 8/8 Plus and iPhone X over the course of fiscal 2018. As a reminder, September and December quarters will be more skewed towards 8/8Plus in terms of apple revenue recognition, and March and June quarters likely more skewed towards the X.
My take: Makes sense. Puts this morning’s headlines in perspective. See Why is Apple down? Let us count the explanations.