Excerpt from the notes I’ve seen. More as they come in, new notes on top.
Tim Long, Barclays: iPhone 12: Mix, Margin in Question. Several key takeaways from the launch: 1) Inclusion of 5G in all iPhone 12s. 2) Lack of headphones and charger likely not enough to offset costs from 5G, OLED and NAND. 3) Starting price of $699 for “mini”, but pricing for mainstream iPhone 12 at $799 is $100 higher vs. iPhone 11 launch. 4) We don’t feel the event effectively demonstrated why consumers need 5G for their iPhone. 5) Shipment of Pro Max and mini slipped into November, which could impact December and help March. Equal Weight. $100.
David Vogt, UBS: Second verse, same as the first. iPhone 12 more evolutionary than revolutionary. Four New iPhones Feature Set Largely As Expected; Timing Slightly Delayed. As expected, Apple’s special event focused on the launch of four new iPhones with 5G sub-6 GHz and mmWave technology capability as the key feature. Importantly, the feature-set and pricing strategy for the new devices is already reflected in our model. Specifically, Apple unveiled two “lower” priced phones, the 5.4-inch iPhone 12 mini and the 6.1-inch iPhone 12 and two “higher” priced phones, the 6.1-inch iPhone 12 Pro and the 6.7-inch iPhone Pro Max version. We forecast just 25% of total iPhones sold in FY2021 will be the higher end “Pro” variants compared to ~38% of the lower priced driven by the $999 starting price point of the Pro models. From an availability perspective, both 6.1-inch models, the iPhone 12 and 12 Pro, are available on October 23, roughly a week later than our expectations. Moreover, likely due to supply chain disruptions, the iPhone mini and Pro Max variant will not be available until Nov 13 , also roughly a week later than anticipated potentially shifting units from 1Q:21 into 2Q:21. Neutral. $115.
Amit Daryanani, Evercore: Could Carrier Promotions & Trade Ins Drive Upside To iPhone Demand. [W]e have already seen some notable carrier promotions especially from AT&T. We think carrier promotions remain an underappreciated lever that could ease the price points for consumers and trigger a strong iPhone cycle. Furthermore, we would note that AAPL is themselves providing aggressive trade-ins and 0% financing to customers (done via. Apple Card). Overall, we expect the promotion activity to pick-up through the year especially when the iPhone 12 Pro Max officially comes to market in early November. Outperform. $135.
Andrew Uerkwitz, Oppenheimer: Apple Introduces HomePod Mini and New iPhones. The HomePod Mini is a more consumer-friendly (cheaper) attempt to take over the central smart home control. Other than expected integration with Apple devices, we didn’t see anything revolutionarily exciting for the smart home ecosystem. The new batch of iPhones are upgraded with stronger cover glass, new SoC, 5G connectivity, and improved camera and display specifications. We see a growing divide between baseline iPhone and the Pro iPhone models mostly defined by camera capabilities. This year’s Pro models highlight HDR video recording for the first time. Pricing seems more reasonable this year, with meaningful upgrades (display, storage, camera, 5G) without price hikes. Outperform. $125.
Kyle McNealy, Jefferies: 5G iPhone Is Here, Cue the Carrier Device Subsidy Competition. Much of the announcement was in-line with our previous views with a few modest surprises. Specifically, we like that mmWave was included in all 4 iPhone 12 devices in the US. Further, we’re already seeing evidence that carrier device subsidies are set to increase. We continue to see a robust 5G iPhone upgrade cycle driven by: 1) the aging installed base of devices ready for refresh; 2) a big industry marketing push behind 5G; 3) increased carrier device subsidies; 4) 5G product differentiation; 5) higher worldwide smartphone penetration; and 6) expanded mid-range offerings. Buy. Target to $140 from $135.
Wamsi Mohan, Merrill Lynch: iPhone 12 with 5G is here; will it drive a boost in upgrades? Although the headline carrier promotions sound aggressive, the fine print is worth paying attention to. Trade in values of the latest iPhones are up to $550 and older models significantly lower. New customers (adding a line for existing), switchers and existing customers upgrading to unlimited plans are eligible for special promotions but not as widespread as the headlines suggest. We note that iPhone 11 also had several trade-in promotions so this promotion is geared towards upgrades of newer iPhones. Neutral. $140.
Rod Hall, Goldman Sachs: iPhone pricing curve tweaked to lower top end and fill gaps. Magsafe and Ceramic Shield nice additions. In our opinion, the best feature adds for the new iPhones were Magsafe charging and increased durability due to Corning’s Ceramic Shield material as opposed to 5G. mmWave in all US SKUs was more extensive than we had expected though we believe Apple’s price changes probably accommodate that from a margin point of view. We continue to see 5G as more a brand than a feature with advantages for carriers but not much value for iPhone owners. Verizon’s CEO announced plans to make it attractive for existing customers to trade in old iPhones for new 5G devices as we had been expecting. All in all, we see the event as in-line with our expectations for the late 2020 iPhone launch with some nice new features on redesigned phones. Sell. $80.
Katy Huberty, Morgan Stanley: 5G iPhone Launch Revs the Growth Engine. Due to store shutdowns and the economic impact of COVID-19, iPhone replacement cycles have stretched well beyond what we view as a 4-year structural ceiling, causing forward growth to be mis-modeled by the Street, in our view. Even before considering potential share gains in markets like Europe and China where Huawei chip supply restrictions are benefiting Apple, our unchanged 220M FY21 iPhone unit forecast is roughly 4% above consensus… Combined with continued strong ecosystem growth, highlighted by re-accelerating iPad/Mac demand and sustained mid-teens Services growth, we see a low teens forward revenue CAGR as increasingly likely, reflected in our $171 bull case valuation. Overweight. Price target to $136 from $130.
Gene Munster, Loup Ventures: 5G: Apple Puts the Ball in Carriers’ and Developers’ Court. In contrast to the commentary from Verizon CEO Hans Vestberg that “5G just got real,” we believe Verizon’s advertised download speeds are only available to about 1% of the US population today and will be available to about a quarter of the population a year from now. The good news is that Apple has done its work of building an affordable 5G device, and now it’s up to the carriers to make true 5G widely available.
Samik Chatterjee, J.P. Morgan: Broader 5G iPhone Line-up with Attractive Service Provider Offers Sets Up for Strong Replacement Cycle. We came away largely positive from the event led by our expectation for the latest line-up of iPhones to drive a strong replacement cycle, led by the combination of: 1) new exterior designs and form factor changes; 2) broader range of display sizes and price points (from 5.8″ to 6.5″ in 2019 to 5.4″ to 6.7″); 3) competitive pricing despite addition of 5G capabilities; 4) support for 5G frequencies, including mmWave across all four models in the US; and 5) improved CPU, GPU and camera capabilities positioning the devices more firmly for superior gaming and photography. Additionally, the underappreciated upside driver could be the attractive financing/trade-in programs launched with Verizon, which we would think are likely to be matched with attractive offers by other service providers, helping drive a strong replacement cycle. Overweight. $150.
Walter Piecyk, Lightshed: Paging T-Mobile, The iPhone 12 Launched Today! The 5G iPhone is here and AT&T slapped a record breaking subsidy on it. That’s good news for Apple, which would benefit if the 6-year lengthening of the replacement cycle inverted. It was also a good day for Verizon’s Hans Vestberg, who got to flip the switch on his 5G network on Apple’s stage with Tim Cook and introduce mmWave spectrum across the complete line of new iPhones. It was less fun for [T-Mobile’s] Mike Sievert.
Harsh Kumar, Piper Sandler: iPhone 12 Pricing Impresses at Launch Event. Earlier today, Apple hosted its iPhone event where it introduced four new 5G models… While each model has several incremental new features, we believe the pricing dynamics are the killer app for the phone launch. Generally speaking, pricing was lower than our expectation, which is important in the current global pandemic. In addition, we see the pricing dynamics reinforcing the company’s plan to at least maintain (if not grow) its global install base to drive further growth of its higher margin services business. Following the event, we continue to believe the iPhone will be the premiere 5G smartphone over the next several years. Overweight. $130.
Amit Daryanani, Evercore: Key Takeaways from iPhone Event. The event included some heavy 5G marketing with the CEO of Verizon making an appearance to discuss the technology. Major updates to the iPhones include: new chipset (5nm CPU), improved display technology, 5G capabilities, and improved photo capability for Pro models. The Pro model is the first phone to include a LiDAR scanner, that will greatly improve augmented reality capabilities. Apple also added the iPhone mini, which will offer the same specs as the iPhone 12 in a smaller form factor(5.1in). The improved chip set on all of the phones and faster connectivity with 5G have resulted in a big improvement in mobile gaming capabilities… The new phones will ship without earbuds or chargers, which was billed as an environmental move, but will also help offset the higher cost of the 5G hardware. In addition, this could add to demand for AirPods. The new HomePod Mini was also impressive and looks compelling at the $99 price point. Outperform. $135.
Daniel Ives, Wedbush: 5G iPhone 12 Lineup Unveiled; Cook & Co. Kick Off Supercycle. This afternoon Apple launched its iPhone 12 product lineup in what we would characterize as Apple’s most important product cycle since the iPhone 6 in 2014 and should translate into a “supercycle” for Cupertino for the next year. The linchpin to this iPhone 12 product event was the 5G capability which given its unprecedented technology capabilities will unleash significantly upgraded speed and performance for the company’s golden installed base. A major focus for the event was highlighting the changes 5G brings to consumers on an everyday basis around streaming and accessing various data in high volume areas (airports, stadiums, cities, etc.) with no latency issues. Outperform. $150.