Expectations for Apple’s (AAPL) iPhone 6s, 6s Plus launch have been rather conservative to-date. Ming-Chi Kuo of KGI Securities, largely considered the best Apple analyst in the world, was predicting iPhone 6s, 6s Plus sales of 70 million during its launch quarter. That would be a slowdown from last year’s 74.5 million units sold, and many of the street’s top analysts are mirroring those numbers.
However, these top analysts are apparently forgetting two things, which will be largely responsible for Apple seeing a big year-over-year improvement in iPhone sales.
Carriers Are Giving Away iPhone 6s
Leasing has become a huge trend in the U.S., a region that’s still Apple’s biggest market.
In the past, and even with iPhone 6 and 6 Plus models, customers were coming off contracts to upgrade. Nowadays, customers with both the iPhone 5s, coming off contract, and the iPhone 6, on leasing plans, can upgrade to the 6s and 6s Plus.
With that said, there are some component changes with the iPhone 6s and 6s Plus, along with the hard-press and camera features, but one reason expectations remain low is that there aren’t a lot of software changes with this latest refresh.
While true, iPhone 5s users will upgrade as they do every year, and for users with the 6 or 6 Plus, why not upgrade when T-Mobile (TMUS) and Sprint (S) are offering the 6s and 6s Plus at leasing prices from $1 to $10 per month?
So, customers currently using the iPhone 6 or 6 Plus can take their phones to T-Mobile or Sprint, turn it in and then walk out with a lower monthly payment for an iPhone 6s. That’s something the carriers weren’t doing last year. Even Verizon (VZ) is joining in on the fun, allowing customers to upgrade their iPhones a full 12 months early to get a new iPhone 6s or 6s Plus. With deals like this, and U.S. carriers basically throwing new iPhones at consumers, expect upgrades galore in the U.S.
China’s Market Opportunity Has Grown Significantly
We all know that China is Apple’s biggest growth driver, that’s no secret. However, what Apple investors, and analysts, tend to forget is that when Apple launched its new iPhone last year, 4G networks in China were very underdeveloped.
For example, China Mobile (CHL) had 90 million 4G customers at the end of 2014. The other two large Chinese carriers didn’t even get widespread 4G approval until earlier this year. At the end of August, China Mobile’s 4G customer base had grown to 229.2 million. That’s a big difference year-over-year, giving Apple a much larger customer base than it had last year.
For this reason, the first quarter for the iPhone 6s in China should be far superior to what Apple saw last year.
iPhone 6s and 6s Plus Get Off to Hot Start
The launch weekend for any new Apple product is very important to both the company and investors. Given the strength of last year, investors weren’t sure what to expect.
However, as I expected, sales are looking strong out of the gate according to analysts at FBR. Last year, Apple topped 10 million unit sales, but this year, FBR and other analysts are expecting to see as many as 12 million based on early demand.
If so, Apple would produce 20% unit growth, as well as growth from the increase in average selling price. The bottom line is that Apple looks poised for yet another year of double digit growth. That would exceed the 4.8% revenue growth that analysts expect for Apple’s next fiscal year, which means higher days for Apple stock.
As of this writing, Brian Nichols was long AAPL and T.
