Apple high-end strength more than offsets low-end weakness (video)

Morgan Stanley's research team has run the numbers.

From "Apple's lead times are much better than expected, says Morgan Stanley's Erik Woodring" which aired Tuesday on CNBC:

Erik Woodring, Morgan Stanley analyst, joins 'TechCheck' to discuss his analysis of Apple product lead times, if there's an imbalance between the company's high- and low-end products and more.

My take: Any data point in a storm.

11 Comments

  1. Daniel Epstein said:
    Well it seems to me a big argument of the bear’s is the pandemic pulled forward demand and now the situation post pandemic will revert the demand. Certainly true of some companies which were pandemic beneficiaries. I have seen people argue this is what happened with Apple and they are expecting sales to slow or revert to the pre pandemic trend line. There may be some truth to this for Mac’s and Ipad’s although supply chain issues have muddied the picture. New product introductions have also changed the dynamics.
    As for Iphone I think the bigger pool of devices is now providing a bigger replacement cycle even with the devices lasting longer. Add in Cell provider trade in deals and there is almost no reason financially not to upgrade (at least in the US) except for the friction of the time it takes prepare the old phone etc. If this replacement effect is true then Apple has truly grown the Iphone pie during the pandemic and continues to do so. This could be a product line gaining sales momentum growth instead of slowing growth. Can happen even in a slowing macro situation. Not what the street has priced in.

    3
    September 20, 2022
    • Gregg Thurman said:
      the bigger pool of devices is now providing a bigger replacement cycle even with the devices lasting longer.

      If there was a pull forward affect I think it was that a greater number then usual, of those iPhones that hadn’t upgraded in 3 1/2 years did so. But then the number of switchers began growing in earnest as well, adding to the installed base. Those switchers are learning they don’t have to upgrade as often to get latest greatest because Apple sw upgrades are backwards compatible for much longer. This has another negative impact to Android share: let’s suppose that average Android upgrade cycle is 3 years. In 9 years Android will sell 3 handsets. That’s 3 fewer handset sales in those 9 years when an Android user switches to iPhone. In that same 9 years iPhone will sell an ADDITIONAL 2 1/2 iPhones (longer upgrade cycle), a net change in comparative volume of 5 1/2 handsets over 9 years in favor of iPhone.

      3
      September 20, 2022
  2. Michael Goldfeder said:
    With T-Mobile for example, the carriers are absorbing the upgrades by literally giving me a new iPhone for no charge. I’ll probably pull the trigger on two of them later in the year. The pro max.

    I understand every analyst has at their disposal an endless series of trite clichés. However, every time I hear: “I don’t want us to get over our skis”, I just cringe.

    2
    September 20, 2022
    • Steven Philips said:
      Me, too!
      I remember what happened the last time I got over my skis. Ouch! 🙁

      2
      September 20, 2022
  3. Gregg Thurman said:
    If Woodring was a part of Katy’s team, you can understand why her analysis was always so good.

    As an aside: I can see unfulfilled demand spill over into the March quarter. Guidance for December and March quarters should be exceptionally strong.

    2
    September 20, 2022
    • Robert Stack said:
      @Gregg: First of all, congrats on your trade! If I ever decide to do options, I’d want to be your student!

      WRT Apple giving out guidance for upcoming quarters, I still believe they will remain exceptionally vague due to ongoing geopolitical uncertainties, covid lockdowns in China, and the possibility of recessions in many major markets (China, US, EU, etc). IMO, there is only downsides to giving out “exceptionally strong” guidance as if it doesn’t happen for any of the reasons cited above (or others), they get hit by lawsuits from so-called “disgruntled shareholders” – aka parasitic lawyers. An added benefit is that whatever $$ they have allocated to buybacks will go much further as in the absence of “exceptionally strong” guidance the stock price will likely go lower at times due to many macro events. At such moments, they can pounce…

      2
      September 20, 2022
      • Gregg Thurman said:
        @Gregg: First of all, congrats on your trade! If I ever decide to do options, I’d want to be your student!

        I have absorbed a lot of bumps over the years, mostly because I’m always looking for strategies that make sense to me (not someone making a living writing unimaginative books). I do not subscribe to wild complex strategies as are often touted on CNBC. My “free” shares strategy is so simple I’m dumbfounded that it isn’t used more. Of course it only occurred to me after trading for about 15 years.

        There is only one piece of advice I’d give you before you consider trading options: do it with money you’d have no regrets losing, and paper trade until you are confident you know what you are doing.

        I paper traded my “free” strategy 5 times (once per quarter) before going live. My current trade is my second. I’m up at the moment, but this trade doesn’t yield results until January. A lot can happen between now and then.

        2
        September 20, 2022
  4. Robert Stack said:
    Erik said he’d like to have more data on lead times out of Europe and Japan. Gene Munster is happy to oblige:

    loupfunds [dot] com/early-iphone-14-demand-signs-are-encouraging/

    Bottom line: same general trends. h/t to Horace’s tweet for this!

    1
    September 20, 2022
  5. Bart Yee said:
    So here’s where we were, best in landscape:
    Apple FY annual rev, iPhone Rev, billions, models sold
    2015 $233.6 $155 iPhone 6, 6+
    2016 $215.4 $136.8 iPhone 6S, 6S+ (First large S letdown), SE
    2017 $229.0 $141.2 iPhone 7, 7+,
    2018 $265.4 $166.2 iPhone 8, 8+, X
    2019 $260.1 $142.3 iPhone XS, XS Max, XR (trade war)
    2020 $274.3 $137.7 iPhone 11, 11 Pro, 11 Pro Max (pandemic), SE 2
    2021 $365.8 $191.9 iPhone 12, Mini, 12 Pro, 12 Pro Max
    2022 $304 YTD + $83-89 est. = $387-$393
    $162.9 YTD + $40.4 est. = $203.3 iPhone 13, Mini, 13 Pro, 13 Pro Max, SE 3

    Where Apple iPhone is headed, target >= 3.5 y/o models:
    2023 iPhone 14 – iPhone 11, XS, X, XR and earlier
    2024 iPhone 15 – iPhone 12 and earlier
    2025 iPhone 16 – iPhone 13 and earlier
    2026 iPhone 17 – iPhone 14 and earlier

    0
    September 21, 2022
    • Bart Yee said:
      The weird thing is looking at the iPhone sales data, one would think we would get future bumps from previous years where Apple sold a lot of iPhones. That may be true. But what about years where Apple iPhone revenues were slow – 2019 and 2020? What that meant, IMO, is Apple users held onto their iPhones one extra year instead of upgrading. Macroeconomic effects aside, this may be fueling some of the previous iPhone 13 and current iPhone 14 demand. As Apple moves to the iPhone 15 in FY2024, it hits much larger iPhone model populations from iPhone 12 and earlier, especially if regular iPhone 14 is a “relatively” slow seller.

      Interesting how the iPhone 14 beach ball is bobbing to the surface while the iPhone 15 beach ball is pulled deeper for its rise.

      0
      September 21, 2022

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