From a note to clients by RBC’s Amit Daryanani that landed in my inbox Sunday:
Details have begun to emerge about the next generation of iPhones that we think AAPL will launch in September timeframe. We expect AAPL to introduce three new phones: an update to the current 5.8″ iPhone X (iPhone XI?), a larger 6.5″ OLED device (iPhone XI Plus?) and a budget-friendly 6.1″ LCD iPhone (iPhone 9?). Clearly, naming of these phones is becoming a complicated process. Effectively we would have three phones with two being OLED and one “budget” friendly LCD model.
The most interesting dynamic to watch will be pricing, specially considering the limited success iPhone X had with $1,000+ ASP. We think the LCD model could drive the highest volumes (~35-50% of volume) and could be priced at $700+. Furthermore, the refreshed 5.8″ OLED (XI) could be priced at $899 ( $100 cheaper vs. current iPhone X) and the larger 6.5″ OLED could be priced at $999 – this would effectively lower the average ASP’s but we think will drive a stronger unit growth.
Overall, we think the focus this cycle would be around AAPL’s ability to segment market and expand its install base.
Net/Net: Maintain OP and $205 target as we see host of tailwinds – capital allocation, services growth, gross-margin upside and attractive valuation.
My take: Despite what Daryanani characterizes as the “limited success” of the $1,000+ iPhone X, the price inelasticity of Apple’s smartphone line remains the envy of the industry.