From a note to clients that landed on my desktop Sunday:
ALL YOU NEED TO KNOW: We believe the launch should be a notable tailwind for Apple, which we think could ship >35M units in the phone’s first year. At a blended ASP of ~$450 or modestly higher given a higher base price, shipments at that volume could generate an additional ~$15-20B in annual revenues (approx. ~4-5% of total sales). Assuming standard product operating margins, it could contribute ~25-30c to EPS (~4-5% of total EPS)...
[W]e think the third generation of SE could follow a similar growth pattern to what the second generation saw vs. the first. In the first year of Apple shipping the first iPhone SE, it sold ~25M units. Apple shipped ~29M units in the first year of the second generation SE, a ~16% increase.
And recall, Apple reported Jun-20 iPhone revenues materially ahead of management and street expectations ($26B vs. expectations for $22B) driven in part by the strong launch of the second iPhone SE.
Net/net: In light of both historical patterns around the previous generations of the iPhone SE and our assessment of current demand for a more affordable iPhone, we think Apple could see substantial revenue contributions from the new SE, potentially reaching $15B or higher.
Maintains Outperform rating and $210 target.
My take: Daniel Ives, for what it's worth, put his chip on the 30M square. We'll never know for sure.
Remember, we discussed this about a year ago with the launch of the iPhone 12, relative to carrier subsidies. We came to a conclusion and even a consensus, I believe, that carrier subsidies would continue into future years. Carriers noticed in years past when they terminated subsidies that they gain churn with many of their consumers moving to other carriers in search of more competitive rates. We came to a conclusion with the release of the iPhone 12 that carriers were returning to perpetual subsidies going forward so as to “lock-in” consumers into carriers’ plans. This approach is as if carriers are developing their own sort of ecosystem of consumer preferred network plans. Keep the subsidies flowing with release of new phone line-up and keep the customers locked-into their existing plans. Make the monthly payments so attractive and customer options so easy that they never leave. In summary, we have returned to the perpetual phone subsidy plans, at least we all are hoping so. If we are correct, then we will continue to see higher numbers of new phones sold than in past years when subsidies ended and consumers held on to their phones longer. The result: higher revenues and profits for Apple.
1) 7.5% increase since the SE debuted 5 years ago or so. Tiny compared just about anything these days.
2) It’s the cheapest smartphone in its class. No Android beats the chips inside.
3) Carrier deals (thanks RPL) and trade-ins reduce the impact further.
And in Mac v. PC as well.
And over time, M-series will eat into render farms, high-end engineering applications, AI, and life science research applications.
Apple silicon drives all this. Apple silicon allow Apples to meet or beat on price and defeat (the competition) on performance and quality.
We may be neglecting or forgetting that one purpose of the SE is to target consumers in developing nations such as India. India is a vast fertile ground for Apple. So, any price increase is to be scrutinized carefully. Correct me if I am mistaken, but to my knowledge I do not believe carriers in India and Developing countries offer the flexible, easy monthly payment plans of which you speak and will drive unit sales of the SE in the USA.
Answer: The Apple brand & its premium quality build.