Credit Suisse: After solid uptick, iPhone 11 wait time trends have softened

From a note to clients by analyst Matthew Cabral that landed on my desktop Monday afternoon:

Robust early demand for the Pro / Pro Max is encouraging and likely supports ASPs [average selling prices]; however, we balance that against growing concern for the relative underperformance of the iPhone 11. Indeed, after a solid y/y uptick in iPhone 11 wait times out of the gate, trends have quickly softened and are now tracking largely in-line with the disappointing iPhone XR cycle from last year despite the $50 price cut. We’ll continue to monitor the path to supply/demand balance closely over the next few weeks. Other key observations include:

(1) iPhone Pro / Pro Max wait times remain 3-4 weeks in the US vs. 2-3 weeks at this point in the launch cycle last year; ex-US wait times are 2-3 weeks, having come in by a few days since Friday but still up ~1 week y/y for the Pro and up slightly less than a week for the Pro Max;
(2) iPhone 11 availability has normalized rapidly in the US with wait times down to 4 days vs. 2 weeks on Friday. Keep in mind, increased availability of supply could also be contributing to the shorter wait times vs. Friday; and
(3) wait times for iPhone 11 are longest in China at 2+ weeks for most SKUs, significantly longer than the 3-5 days seen in the prior cycle.

Maintains Neutral rating and (underwater) $209 price target.

My take: Could be increased supply, could be softening demand. Could be noise.

6 Comments

  1. Ralph McDarmont said:
    I would change the headline word softened to improved. As ped and even Cabral points out, increased and steady production is a worthy consideration, too. Tim knows quite a bit about tuning production to match demand. Hasn’t been perfect but Apple saw this one coming. They had the latest phones stacked to the sky prior to launch. All gone but a great jump start. Production will scream through Christmas.

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    September 24, 2019
    • Gregg Thurman said:
      The length of quarters varies between 12 and 14 weeks. When Apple reported units, and in search of a constant, I calculated weekly units sold and compared the result to prior year (YoY) results. Thus eliminated spikes and dips U.N. quarterly results due to number of weeks in a quarter.

      Calculating the weekly rate gave me a sense of Apple’s production capacity, which remained fairly consistent, and led me to be believe that new model ramp commenced mid to late August, ending very late the following July.

      I don’t expect this year’s demand to significantly alter the above, as fluctuating labor forces can be expensive to manage/maintain.

      I’m not near my Mac so can’t report what the weekly rate tended to be (I’ll have that in a short while). One thing I noticed is that no matter how units Apple sold for the year, about 32% (top of head recollection) were always sold during to December quarter.

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      September 24, 2019
      • Gregg Thurman said:
        December quarter FY2015 through FY2018

        Average weekly unit sales: 5.575 Million
        Range: 5.592 Million (FY2017) to 5.947 Million (FY2018)

        FQ1 unit sales (average if FY2015-FY2018) 34.74% of full-year results.

        Multiply FQ1 unit sales by 2.81 to project full-year sales.

        I would switch the above unit sales calculations to revenue calculations except for the wildly fluctuating ASPs brought about by the introduction of the iPhone X, iPhone XR, and this year’s promos. Revenue calcs/comparisons based on weekly results will be meaningless until I derive a formula that addresses the issue.

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        September 24, 2019
        • Gregg Thurman said:
          Whoops. Average weekly unit sales: 5.575 Million should have read:

          Average weekly unit sales: 5.755 Million.

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          September 24, 2019
  2. Jerry W Doyle said:
    Ralph is correct! Increased supply is commensurate with increased demand. Great jump start for production to meet increasing demand through the Holiday periods. I know individuals who plan to purchase new phones during the upcoming Holiday Season shopping period. It’s going to be an Apple gift giving Holiday with the new iPhone 11 series leading the way. LAISSEZ LE BON TEMPS ROULER!

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    September 24, 2019
  3. Aaron Belich said:
    Could be Credit Suisse’s continuing paltry attempt to maintain the Apple Is Doomed cadence so they can profit with a short. Are they on the bottom on your Analyst Scorecard?

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    September 25, 2019

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