Broadly respected analyst Ming-Chi Kuo writes that sales of Apple’s new iPhone XR are slightly below expectations and confirm a handful of previous reports we have seen in recent days. In a new investor listed by MacRumors Kuo lowered its appreciation for iPhone XR sales by up to 20% for the current quarter.
Now is this the reason to panic? Not necessarily. To this point, Kuo argues that lower demand for iPhone XR can be compensated – in economic terms – through the sale of Apple’s pricier iPhone XS models. Apple’s latest quarterly report actually illustrates that Apple – with more marginal-friendly devices in the mix – can easily generate more revenue even in the context of stagnant iPhone sales.
In particular, iPhone sales were stagnant last quarter, while revenue from iPhone sales jumped by a whopping 29%. In other words, whether iPhone XR sales are over or under forecasts is probably irrelevant as long as Apple continues to find ways to boost revenue, which is clearly more important than how any specific iPhone model makes on the market.
All said, Kuo believes that cumulative iPhone sales for the quarter will be stable, albeit with another mix of iPhone XR and XS sales as expected. To this end, revenue can ultimately check in a little more when all is said and done.
Kuos note is in part:
We have reduced our iPhone XR delivery estimate from 1
00mn units to 70mn during the new product lifecycle (4Q18-3Q19) for the following reasons: 1) Negative effects on consumer confidence in the trade war, especially on the Chinese market, 2) Expectations from more users for more affordable XR or dual-camera and narrower designs to be provided at the current price level, and 3) Competition from the Huaweis Mate 20 Series.
While Kuo may be entitled to a cradle in iPhone XR sales, his explanation seems a little bit off. I can not really imagine that many potential iPhone XR buyers are reluctant to pull the trigger because the device lacks a dual camera and sports a bit bigger. One factor that has not been discussed to a large extent is that Apple’s advertising campaign for iPhone XR appears to be non-existent. With November already in full swing, it will be interesting to see if Apple starts with huge iPhone XR marketing in the next few weeks.