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Apple (AAPL) Pre-Orders Solid Versus Prior Years, Signals Strong Upgrade Cycle - BMO Capital

September 15, 2014 12:25 PM EDT
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Price: $173.72 +0.64%

Rating Summary:
    40 Buy, 24 Hold, 7 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 8 | Down: 2 | New: 35
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BMO Capital analyst Keith Bachman weighed in on Apple (NASDAQ: AAPL) after the company announced record pre-orders for the iPhone 6 and iPhone 6 Plus that exceeded 4 million units in the first 24 hours.

Looking at comparable to prior launches Bachman noted first day pre-orders of over 4 million units of the iPhone 6/Plus, compares with pre-order units of over 2 million of the iPhone 5 in 2012, 1 million of the iPhone 4s in 2011, and 600,000 of the iPhone 4 in 2010. For the iPhone 5s/c in 2013, Apple did not announce first day pre-orders.

"Given record pre-orders, we believe that first weekend sales (when available on September 19) of the iPhone 6/Plus could beat the over 9 million units of the iPhone 5s/c, with supply being a key issue more so than demand, in our opinion," the analyst commented. "For comparison, first weekend sales were over 5 million units for the iPhone 5, 4 million units for the iPhone 4s, and 1.7 million units for the iPhone 4."

Apple indicated that many pre-orders are scheduled to be delivered in October, the firm notes that Apple’s website indicates available to ship times of 3-4 weeks for the iPhone 6 Plus and roughly a week for the iPhone 6. "Consistent with our past comments, we believe that supply for the 5.5-inch iPhone 6 Plus will initially be limited, and we had suggested that the iPhone 6 Plus will probably have a meaningful backlog for some time," Bachman said.

"We currently project iPhone units of around 35 million in the September quarter and 56 million in the December quarter, though we believe that our unit as well as our ASP assumptions have upside tension," he said. He added, "As we indicated in our Apple event note, Apple is offering 64GB of storage capacity compared with 16GB for an incremental $100 in the iPhone 6, versus 32GB of storage capacity compared with 16GB for incremental $100 in the iPhone 5s. We think the large screens will cause consumers to want more storage, as we have stated previously, which is good for both ASPs and margins. Further, by offering more storage capacity vs. previous iPhone versions, we believe that Apple will motivate consumers to buy more storage. Finally, we think the iPhone 6 family will cannibalize iPad mini, which is positive for Apple’s consolidated margins."

The firm maintained an Outperform rating and price target of $106 on AAPL.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $101.66 yesterday.



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