Apple’s shares are recovering; investors are relying more on sales of the new range of iPhone 11. But the good times may not be sustainable.
Last month, the company introduced the iPhone 11, the iPhone 11 Pro and the iPhone 11 Pro Max. These new phone models have faster processors, better camera quality, and longer battery life. The new iPhones were available on September 20.
Since then, several Wall Street analysts have raised their price targets on Apple stocks (ticker: AAPL), citing the improvement in the dynamism of sales of the iPhone.
Apple’s shares rose 7.8% in the past month, compared with a 1.4% decline for the S & P 500 and a 1.6% decline for the Dow Jones Industrial Average.
On October 4, Nikkei announced that Apple had asked suppliers to increase the production of the last line of the iPhone 11 by 10%, or 8 million units. The increase in orders is mainly due to the cheaper models of iPhone 11 and 11 Pro, while Apple would have slightly reduced its orders for the 11 Pro Max more expensive, announced the media.
However, investors need to consider several factors before evaluating the iPhone 11 cycle. First, Apple has cut prices for its low-end model, the iPhone 11, by around 7% and compared to the iPhone XR. Comparable last year. Price declines are a slippery slope for future profitability, even if it helps demand.
Secondly, the launch of the iPhone 11 is five weeks before the launch of the iPhone XR last year.
“This year’s launch schedule compared to last year’s spread schedule could also skew the comparison year after year,” said Credit Suisse analyst Matthew Cabral on Monday.
In many ways, this current cycle is reminiscent of the iPhone 6S, which began in 2015. The iPhone 6S was a progressive upgrade from the previous year with the same fitness factor, as did the iPhone 6S. 11. In 2015, Apple encouraged initial sales by stating: “Sales for the iPhone 6s and iPhone 6s Plus have been phenomenal, surpassing the sales results of the first previous weekend in the history of the iPhone. Apple. ”
However, as this year, the launch of the iPhone 6S in China in late September 2015 was asymmetrical compared to mid-October 2014 for the iPhone 6 of the previous year.
After the first results, better than expected, the cycle of the iPhone 6S collapsed. In April 2016, Apple announced a disappointing drop in sales and a shortfall.
Similarly, Jun Zhang, an analyst at Rosenblatt Securities, predicts that iPhone sales will decline in the first half of 2020. He said the company would face tough comparable price cuts of 30% from the iPhone XR, which instituted early 2019.
“We anticipate that Apple will reduce the production of the iPhone 11 Pro and Pro Max after the initial commissioning in October,” he wrote Monday. “We think it will be difficult for Apple to increase iPhone sales in 2020.”
Apple did not immediately respond to a request for comment on Zhang’s forecast.
Finally, Apple’s vast iPhone user base can update their iPhones earlier in each cycle. This could lead to poor sales after the first wave of accumulated demand.
Apple plans to release its financial results for the fourth quarter on October 30. Wall Street is becoming more optimistic, and iPhone sales could impress during the quarter. But this is only part of the story. It will take a little more time to evaluate the real success of the iPhone 11.
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