From a note to clients by Piper Jaffray’s Michael Olson that landed in my inbox Monday:
Our survey of 1,500 iPhone users shows that ~40% have not upgraded to iPhone X because they either feel the device is too expensive (31%) or they prefer a larger screen (8%) — details in table below.
Given the next release of iPhones this Fall will likely address both of these issues, we are increasingly confident in our FY19 iPhone estimate of 233.8M, which is ~7M (3%) above consensus (227M). We believe FY19 will provide evidence of the “super-long” cycle we expect will play out as users migrate to “X-gen” devices over a multi-year period (details in paragraph below).
Slightly Lowering FY18 iPhone Ests. Based on our survey that suggests a large pool of potential iPhone buyers are looking for a larger screen or lower priced option and may, therefore, wait until the next batch of devices is out late this calendar year (pushing a large % of upgrades into FY19), we are slightly lowering FY18 iPhone units, from 230M to 226.3M. Our FY19 estimate is unchanged, but now appears potentially conservative.
“Super-Long” Cycle – Expanded Array of Next Gen iPhones Should Drive Ongoing Upgrades Well Into FY19. We anticipate a wider array of new form factor devices, similar to iPhone X, will launch in late Fall-18. While we have no direct knowledge of Apple’s launch plans for next year, we expect a lower priced X-gen option (potentially the current iPhone X with a price cut and/or an X “Lite”) and a “plus” X-gen model. As options for the “X-gen” iPhone expand, “shots on goal” for upgrading increases.
Maintain Overweight rating and $200 price target.
My take: If Apple doesn’t release three X-gen models this fall, as rumored, there’s going to be hell to pay.
See also: Apple shares back on track after March guidance scare
The problem with too much precision, of course, is that if you miss by a little, you miss entirely. With less precision (e.g. buckshot), you can be a little less accurate, but still cover the target.