Apple Inc. reported its first sales drop in the past 13 years in Q1 of 2016, and since then, its stock has been taking a beating. The firm will reportedly release the iPhone 7 in 2016, and whether or not it will lead to a potential bump in sales, is something that investors are trying to figure out.
And, the good news is, several analysts checking in with Apple’s Asia supply chain are relatively bullish on the iPhone sales going forward, notes Business Insider.
Apple sales to rise
Apple Inc. is preparing to make as many as 72m to 78m iPhone 7 units, as per a report in Taiwan’s Economic Daily News. Barron’s was the first to spot this, suggesting Apple is aiming at its highest production target in two years. The newspaper cited Apple suppliers that included Hon Hai Precision (better known as Foxconn) and Pegatron. This indicates that Apple hopes to sell more iPhone 7 units than the iPhone 6 units.
Separately, BMO Capital Markets analysts have said the upgrade cycle to the iPhone 7 is shaping to be a big one, and this is one of the reasons why Apple is building so many units of this device.
In a note, the analysts stated, “What we find most interesting is that we believe we are entering the iPhone 7 cycle with this highest percentage of phones in the installed base at least two years old, at about 26% (compared to 23% for iPhone 6).” It translates to about 120m phones. For this reason, the analysts believe that despite lackluster features, the device will drive an improved replacement rate.
Meanwhile, Pacific Crest Securities analysts note that the iPhone 6 cycle added 100m people to Apple’s user base, and these users will eventually need to upgrade to a new phone. And, in case Apple’s latest customers stick to their iPhones for longer, then it should lead to a reduction in the growth but not prevent it altogether, the analysts said.
iPhone SE – performing better than expectations
In a note, Nomura stated that the most recent iPhone launch – the lower-cost iPhone SE – has been a hit. Supplier orders are rising and the lead times for an iPhone SE remain elevated at about 2 to 3 weeks around the world, the analysts say. However, the possibility that many new customers will opt for the $400 iPhone SE instead of the iPhone 6S or the iPhone 7 (when it is launched), is not increased because of this.
“The new iPhone SE launch has proven more robust than we expected … We consider this a mixed blessing as the strength likely includes cannibalization of the ever-weaker iPhone 6s …,” the analysts noted.
Nomura analysts were initially anticipating 10-20m iPhone SE sales in the first year, but now they believe the volumes to hit 30m by the end of the year. Citing their checks, the analysts said Apple has increased its production forecast. Nomura has a buy rating on Apple Inc. with a price target of $120.