The iPhone 11 hits the shelves today. What should investors expect in terms of sales?
Introduced on Sept. 10, Apple (AAPL) - Get Report began taking pre-orders for the new iPhone lineup a few days later, and today the phones are officially out in the wild. Apple shares are up 2.8% since the September event, which also showcased more details about Apple TV+, the Apple Watch Series 5 and other product updates.
Critical reception of the iPhone 11 has been mixed. The lineup includes a standard iPhone 11, plus Pro and Pro Max models, the main difference being the triple-camera setup featured in the latter two models. The standard iPhone 11 also starts at $699 -- a decrease in price from the iPhone XR, which cost $749 and up.
With a 5G iPhone due out in 2020, expectations for the iPhone 11 were modest in the run-up to the event. But early signs suggest that iPhone 11 sales could be stronger than previously expected -- with some of the positive signals originating in China, a critical market for Apple amid ongoing trade concerns.
The Chinese ecommerce site JD.com, for example, posted on Weibo on Saturday that day one pre-orders for the iPhone 11 series jumped 480% versus the previous year, Reuters reported. Citing strength in China, Apple analyst Ming-Chi Kuo of TF International Securities raised his 2019 shipment forecast for iPhone 11 from between 65 million and 70 million units to between 70 million and 75 million units.
Wedbush's Dan Ives wrote on Wednesday that iPhone 11 launch units could exceed 75 million, also based partly on pent-up demand in China.
"The base model iPhone 11 currently we estimate is seeing pre-order activity in the all-important China region that is 'roughly double' from a year ago with XR as it appears the lower price points, dual camera functionality, and added colors is hitting the sweet spot for consumers that have been waiting to upgrade," Ives wrote.
In China, there are currently between 60 million and 70 million iPhones in the window of an upgrade opportunity according to Ives, and the lower price point compared to the iPhone XR could make the iPhone 11 an appealing upgrade option for many in the region.
If the iPhone 11 does sell better than expected, that'd be welcome news for investors. Apple's ongoing shift to services, and away from its iPhone-centric business model, may be the linchpin of its future growth -- but iPhone sales still make up roughly half of Apple's overall revenue, and phone sales overall have been trending downward for several years now.
Analysts surveyed by FactSet are forecasting iPhone revenues to decline year-over-year for 2019, with that decline moderating in 2020. In the meantime, Apple's services are on the up-and-up, with wearables revenue growing "well over 50%" last quarter, according to CEO Tim Cook, and Apple's rollout of Apple Arcade, Apple Card and Apple TV+ this fall.
Not everyone is feeling so optimistic about iPhone 11 sales, however. On Monday, Rosenblatt Securities analyst Jun Zhang estimated that first weekend pre-orders for the iPhone 11 were 20% lower than last year's models, based on an analysis of retail activity.
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