J.P. Morgan: Apple customers seem to prefer the pricier iPhone 12s

From a note to clients by analyst Samik Chatterjee that landed on my desktop Sunday evening:

We find lead times for the 12 mini and 12 tracking lower than prior weeks at 8 and 5 days, while lead times for the 12 Pro have been stable at 24 days and the 12 Pro Max has expanded to 25 days. Two broad takeaways for investors include: 1) high-end models are doing better than expected, likely driven by early 5G adopters; 2) lead times are expanding in US and are high in China, but moderating in Europe, revealing that enthusiasm around 5G remains low in countries without significant 5G infrastructure.

Maintains Overweight rating and $150 price target. 

My take: This report seems to contradict several findings in his last note. (See: Carriers say Apple’s iPhone 12 is selling better than the Pro.  As I say. the problem with lead time equations is that they have two unknowns — one is supply and the other demand.

7 Comments

  1. Michael Goldfeder said:
    This game of trying to track iPhone sales based on the lengthening or shortening of lead times is quite fascinating to read and or watch in video clips. It’s reminiscent of a weatherperson saying there’s a 20% chance of rain tomorrow. Why don’t they ever say there’s an 80% chance it will be sunny tomorrow?

    Lots of folks have been hanging on to their older iPhones for several years, and right now the mobile carriers are offering some tremendous discounts for those individuals to upgrade into 5G models. To me, that’s a much better barometer of the success of this 5G launch by Apple. We’ll know for certain at the end of January, 2021 when the actual sales numbers for the quarter are reported.

    0
    November 15, 2020
    • Robert Paul Leitao said:
      Michael:

      I think you’ve brought up an interesting point. The surge in interest in the iPhone 12 series, due in part to 5G connectivity, may be expanding the consumer universe of early adopters. The carrier promotions, no doubt, are adding to demand.

      0
      November 15, 2020
  2. Robert Paul Leitao said:
    This is among the challenges of looking at static statistics in a fluid environment. It’s good to see analysts tracking lead times, but the patterns appears to be consistent with past iPhone releases. Early adopters tend to migrate to the more feature rich handsets and larger storage capacities.

    One difference this year is the aggressive carrier promotions pretty much across-the-board and carriers are interested in locking in consumer contracts, especially post-paid consumer contracts. Additionally, impulse buyers will buy what’s in stock and currently the iPhone 12 (versus the iPhone 12 Pro, iPhone Pro 12 Max and the mini) are readily available for immediate purchase.

    0
    November 15, 2020
  3. Michael Goldfeder said:
    @ Robert Paul Leitao:

    I’ve also read that more than 90% of all teenagers want an iPhone as opposed to any other brand. So now one can factor into the equation multiple teenagers having to be at home and learning remotely. I cannot fathom how many parents will want to keep that generation of “kids” even happier now that everyone is under the same roof together for more hours each day than ever before during this pandemic.

    Who wants a cranky kid around them 24/7 when a transcendent iPhone will make them more tolerable to be around. Maybe even toss in an iPad or Mac for good measure and make the Best Parent List for 2020 and 2021.

    1
    November 15, 2020
  4. Gregg Thurman said:
    I see lead times as totally irrelevant to anything. I believe Apple makes higher gross margin on the iPhone 12 than it does on the SE, Mini, and Pro models. Further, Apple has worked with the carriers to maximize model sales based on carrier subsidies. In order to maximize Apple’s gross margin/revenue and minimize subsidy costs to the carriers, Apple is controlling availability to favor the iPhone 12 over the iPhone 12 Pro and iPhone 12 Pro Max.

    Many more will take today’s subsidized price and immediate delivery before paying a higher price and waiting nearly a month for delivery.

    Only those absolutely desirous of the Pro’s camera will pay the higher price and accept longer delivery times.

    1
    November 15, 2020
  5. Jerry Doyle said:
    Carrier subsidies this year is a significant upgrade incentive for many consumers buying iPhones. It is good that these consumers are responding now to those subsidies since something tells me that those significant subsidies won’t be around next year and the year after. This is the year of the 5G and the carriers are going all out to spread the gospel.

    1
    November 15, 2020
  6. Bart Yee said:
    Wonder if Bas can chime in with whether Euro carriers are providing similar iPhone 12 promotions since 5G there is also not yet built out?

    Seems to me the iPhone 12 w/o 5G still would be a worthy upgrade (like in India and much of S. America.) 5G features make the iPhone 12 series a bit future proof for those thinking ahead. I think US carriers decided, especially with the pandemic affecting usage and sales upward, pushing the iPhone 12 would be the grand slam they needed to get users to pay more for 5G plans, available or not.

    0
    November 16, 2020

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