iPhone 5 Sales: When 5 Million Is a Disappointment (Update 1)

Updated from 8:49 a.m. EST to provide additional commentary in the 10th to 12th paragraphs.

NEW YORK ( TheStreet) -- Apple ( AAPL) announced that iPhone 5 sales topped 5 million in their first weekend, better than the iPhone 4S, but below some estimates.

Some on Wall Street were expecting as many as 10 million iPhone 5s to be sold in the first weekend, perhaps an indication that sales are not going as briskly as everyone thought. (My own personal expectation for the weekend was sales of between 6 million and 8 million iPhone 5s).

"Demand for iPhone 5 has been incredible and we are working hard to get an iPhone 5 into the hands of every customer who wants one as quickly as possible," said Tim Cook, Apple's CEO in a press release. "While we have sold out of our initial supply, stores continue to receive iPhone 5 shipments regularly and customers can continue to order online and receive an estimated delivery date. We appreciate everyone's patience and are working hard to build enough iPhone 5s for everyone."

The company also announced that more than 100 million iOS devices were upgraded with iOS 6, Apple's newest mobile operating system.

With the hoopla surrounding iPhone 5 sales, including some analysts saying "it will fly" 5 million units has to be somewhat of a disappointment. The phone itself received exceptionally strong positive reviews at its unveiling, but some of the new features for iOS 6, including Apple Maps, and Passbook, have been perceived as lackluster.

Atlantic Equities analyst James Cordwell wrote in a research note he expected at least 6 million units for the opening weekend.

"Given the materially longer queues we are incrementally confident that Apple will be able to at least meet the 6m figure we have assumed for iPhone 5 sales over the opening weekend and we see potential upside to our 28m Q4 (Sep) estimate," Cordwell wrote in his note. He rated Apple shares overweight with a $760 price target.

Deutsche Bank analyst Chris Whitmore raised his price target on the Cupertino, Calif.-based technology giant on expectations "the iPhone 5 will fly."

"We believe demand for iPhone 5 is extremely robust and will prove more durable than the iPhone 4S cycle due to its substantial feature set upgrade (simultaneous form factor, speed and LTE upgrade). With a fast geographic ramp (9 countries on Sept 21; another 29 by end of month and 100 countries on 240 carriers by year end) we expect supply to be the gating factor to near-term unit shipments; not demand," Whitmore wrote in his note.

Apple bulls will claim this is more than iPhone 4S sales, and the Apple growth engine is doing fine. That is true, but what Apple bulls aren't telling you is that iPhone 5 sales have the same normalized growth as the iPhone 4S. Each previous iPhone has seen a jump in normalized growth when accounting for more carriers, but not the iPhone 5. This is something to worry about, at least in the short-term.

It's tough to look at one opening weekend when the phone is available in only nine countries and call it a disappointment, especially when Apple sold out of its initial stock. It could be a supply chain issue, it could be Apple is trying to manage supplies for the all important holiday quarter, it could be just that it's a shortfall, and the iPhone 5 isn't the must-have accessory anymore.

Either way, Apple shares were down roughly 1.3% this morning, and while 5 million units is still an exceptionally strong number, Wall Street was looking for more.

Interested in more on Apple? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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