Should Apple Be Worried about New iPhone Demand?
The upgrade cycle occurs as existing iPhone customers wait until the termination of service contracts to acquire new iPhones at heavily carrier-subsidized prices. The record-selling iPhone 4S, according to the report, may have pulled forward much of the would-be demand for the next iPhone.
With another Friday Boy Genius report pointing out the migration of customers toward prepaid iPhones- investors might wonder whether iPhone demand concerns are well-founded.
Benzinga reached out to analysts on the matter. They pointed out that the iPhone 4S has had a disrupting effect, related to Apple's tremendous ramp-up in the supply of the phone. One analyst noted that Apple's ability to ship product out was significantly upgraded with the 4S compared to iPhones of the past. Whereas it would have taken Apple three to four quarters to fill channels with the iPhone 4, it took only two quarters with the current phone.
Given marginal upgrade cycle concerns, this analyst has smoothed out estimates for the remaining two quarters until the new iPhone is released. To this end, the analyst's firm slightly lowered estimates for the June quarter and raised estimates by the same amount for the quarter ending in September. Nonetheless, the analyst expected the next iPhone to outperform 4S for the December quarter, helping raise the total calendar-year shipments. The firm has 2012 shipment estimates at 150 million units and 2013 estimates at 180 million units.
Also, the same analyst noted that prepaid channels would be positive at the margin for Apple, given a potential penetration of approximately 20 million units. This potential penetration included 14 million at Sprint and 1 million at Leap Wireless' (NASDAQ: LEAP) Cricket. However, Apple might initially face headwinds in its attempt to reach this penetration, given that prepaid subscribers are usually characterized by lower income.
Based on the aforementioned analyst comments, investors might conclude that demand weakness on the next iPhone is an overly cautious stance. Thus, the newest iPhone may yet prove to be a catalyst for Apple shares, given the firm's recent lukewarm reception in the market. Monday, Apple traded near the $580 level.
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