Apple Inc. (NASDAQ: AAPL) has nearly reached a supply-demand balance for the iPhone X, according to analyst Gene Munster of Loup Ventures. In the final week of December, average iPhone supply increased to 96% in U.S. Apple Stores. Online availability remains at three days from order placement to shipping.
Munster also stuck with his forecast for the iPhone X’s average selling price of $740, well above the consensus estimate of $705. That bodes well for Apple revenues and profits for its first fiscal quarter of 2018.
During the four full weeks of December, iPhone X availability rose from 25% in the week ending December 10, to 44% in the week ending December 17, to 75% for the week ending December 25, to 96% last week. Global availability online (in eight countries) was essentially unchanged at three days last week.
Munster also discounted news last week that Apple would cut iPhone production by 40%, from 50 million units to 30 million for the quarter ending in March. He based his doubts on remarks by Apple supplier Lumentum during its conference call on November 1.
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Lumentum supplies about 90% of the vertical-cavity surface-emitting lasers (VCSELs) Apple uses for 3D sensing, augmented reality applications and facial recognition for the iPhone X. Munster noted:
[Lumentum] announced 3D sensing revenues of $40M for the Sep-17 quarter, adding they generated more revenue in the single month of October than they did in all of the Sep-17 quarter. They also expect monthly shipments to increase in Nov-17 and Dec-17. Most importantly management indicated their 3D sensing monthly run rate could remain at similar levels in the Mar-18 quarter, a conclusion drawn from customer feedback and order rates.
That could change, obviously, but Munster does not expect it to. Based on an estimated price of $7 per VCSEL per iPhone and a calculated $127 million revenue stream in the March quarter, Munster estimates a quarterly shipment total of around 65 million units. That’s hardly a 40% cut.
Finally, Munster notes that iPhone X availability was tight all through the December quarter. Expecting a production cut following a period of constrained supply is not typical. It is possible, he concedes, that Apple would maintain production of iPhone X while cutting production of other iPhone models. Even at that, however, iPhone X accounts for about 30% of iPhone volume, which should be enough to keep production levels strong.
Apple stock traded up about 1.2% Tuesday morning, at $171.29 in a 52-week range of $114.76 to $177.20.
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