Apple Inc.’s (NASDAQ:AAPL) 2017 iPhone launch season has been a roller coaster ride so far, and it seems that won’t be changing anytime soon. The iPhone X, which had been showing 5-6 week delivery times since selling out almost immediately at release, is now available in just 1-2 weeks.
Having shipping times dramatically improve just three weeks after it first went on sale sets off alarm bells. Is iPhone X availability the result of cratering demand?
If so, it goes without saying that would be bad news for AAPL stock. However, an analyst report released on Friday says the additional supply is actually the result of production improvements.
That’s good news for Apple investors who had been disappointed that manufacturing issues have seriously impacted iPhone X availability, likely de-railing the expected iPhone super cycle and in turn holding back AAPL stock.
iPhone X Availability Is Now 1-2 Weeks
When the new flagship iPhone was first available for pre-order on Oct. 27, estimated iPhone X shipping times quickly slipped to 5-6 weeks. They’ve been like that ever since. That has caused some hand wringing among AAPL investors, who have been counting on the iPhone X as the key driver of an iPhone upgrade super cycle. After all, you can’t have record iPhone sales if there are no iPhones available to sell.
But late last week, iPhone X availability improved to a 1-2 week timeframe. That sudden improvement was potentially worrisome, because it could indicate that just three weeks after launch, demand had dropped for the iPhone X.
Improved iPhone X Shipping Times
MacRumors got a copy of a report on the issue from KGI Securities analyst Ming-Chi Kuo, and it appears to be all good news for Apple and AAPL stock investors. According to Kuo, the sudden improvement in iPhone X availability is because a production bottleneck has been resolved — not weakening demand.
You may recall the many reports leading up to the launch of Apple’s new smartphone about manufacturing challenges. In particular the dot projector — a component of the TrueDepth camera system that enables Face ID — was proving to be a challenge. At one point, Apple was rumored to have eased up on requirements for this component to improve yields, although the company quickly denied doing so (and there was no subsequent improvement in iPhone X availability).
According to Kuo, the issue has now been addressed. He says that Hon Hai Precision Industry Co., Ltd (OTCMKTS:HNHPF) — better known as Foxconn — is now hitting iPhone X production rates of 450,000 to 550,000 units per day. As the iPhone X prepared to launch, those numbers were in the 50,000 to 150,000 range.
Signs Point to a Record Q1 for AAPL Stock
The first real hint that the iPhone upgrade super cycle may be back on track came from Apple during its Q4 earnings report. The company provided earnings guidance of $84 billion to $87 billion for its next quarter. That’s an improvement of between and 7% and 11% over the record-setting Q1 2017 earnings that saw AAPL stock surge 3%.
Apple’s $999 flagship has been well received, despite the high sticker price. A few issues have popped up, including some defective OLED displays — although nothing like the problems Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) has experienced with the Google Pixel 2 XL. Apple has moved fast to address most of these reported problems, while others have proven to be relatively isolated issues.
With the news that iPhone X availability has improved to the point the company is now able to deliver up to 550,000 units a day, Apple’s guidance is making sense. If Ming-Chi Kuo is correct and demand continues (along with the expected strong holiday sales for Apple’s other new products), Q1 2018 is back on track to be another record for Apple, and it seems likely to see AAPL stock hit new heights.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
