A few months ago, there was an assumption that Apple Inc. (NASDAQ:AAPL) would be enjoying an October of record-smashing iPhone sales. AAPL stock hit new highs at the start of September in anticipation of a super upgrade cycle, but things haven’t quite worked out that way.
Apple chose a staggered release, with the iPhone X not launching until the start of November amid rumors of part shortages. Now a report suggests last year’s iPhone 7 is outpacing iPhone 8 sales in the U.S.
Are the wheels falling off the iPhone upgrade bus?
Report: Carriers Say iPhone 8 Sales Are Weak
There were signs that this was not going to be the smash Apple quarter investors were hoping for right from the time of the September iPhone event. Reaction to the new iPhone 8 was muted — it looked virtually identical to the iPhone 7 (and iPhone 6 and iPhone 6s). The back was glass instead of aluminum, the camera is improved and it supports wireless charging, but there were fears it was not a compelling upgrade.
The appearance of slow iPhone 8 sales at launch, with line-ups at Apple stores smaller than usual and plentiful online stock availability, led to a slide in AAPL stock.
Apple has declined to release actual sales numbers, but a report from Reuters suggests the iPhone 8 may be doing even worse than we’d thought. A survey of carriers by KeyBanc Capital Markets found that in U.S. stores, last year’s iPhone 7 is beating iPhone 8 sales. Why? According to Keybanc’s analyst: “Many respondents indicated that a meaningful portion of customers are buying iPhone 7 in lieu of the new iPhone 8, given the lack of significant enhancements in the new phone.”
Also noted as factors were the $150 price difference between the now-discounted iPhone 7 and the iPhone 8, and “modest” carrier iPhone 8 promotions.
There’s also the iPhone X — and that’s where a worrisome story has the potential to turn into good news for AAPL stock.
Does This Signal Strong iPhone X Sales Ahead?
One of the big concerns about the iPhone X has been that Apple might inadvertently sabotage its success by also releasing the new iPhone 8. With the new flagship starting at a whopping $999 and not even available for pre-order until Oct. 27, there have been worries that iPhone 8 sales would cannibalize the iPhone X.
Apple fans might be impatient, or unwilling to shell out the big dollars. Those who were being counted on to buy the flagship might settle for the iPhone 8 instead.
Weak iPhone 8 sales may have a silver lining for Apple investors in that they could well indicate many buyers are waiting for the iPhone X to arrive — despite its price and the availability of the new iPhone 8.
In another bit of good news, reports are coming from China that Apple’s suppliers seem to have nailed the issues with producing the 3D sensor in the TrueDepth camera. The spectre of parts shortages leading to iPhone X scarcity have been another drag on AAPL stock. However, industry insiders are now saying that Hon Hai Precision Industry Co., Ltd. (ADR) (OTCMKTS:HNHPF) — Foxconn — will meet Apple’s iPhone X demand ahead of Christmas.
Of course, we won’t have confirmation of iPhone X availability or demand until it actually goes up for pre-order on the 27th, and starts showing up in stores on Nov. 3. Until then, take the reports of slow iPhone 8 sales with a grain of salt. Rather than being a cause for alarm, they may just mean that the dream of an iPhone super cycle is still alive.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.