http://seekingalpha.com/article/3752396-apple-foxconn-data-points-to-moderating-iphone-sales-growth
Apple: Foxconn Data Points To Moderating iPhone Sales Growth
Dec. 13, 2015 1:24 PM ET | About: Apple Inc. (AAPL)
Summary
Foxconn's revenue data for November indicates continued sales growth, but at a more moderate rate.
This has caused me to lower the low end of my forecast range for iPhone sales in the December quarter.
I still expect iPhone sales growth to be at least 5% y/y for Apple's fiscal Q1.
Apple's (NASDAQ:AAPL) iPhone supplier Foxconn reported revenue for the month of November of $16.04 billion, just a 0.5% y/y increase. This still puts Apple on pace to beat the difficult iPhone sales comps of last year, but by a smaller margin. Other indicators of iPhone sales, particularly Fiksu market data, continue to point to a strong quarter. iPhone unit sales growth for the quarter appears to be in the range of 5.0-8.7%.
Source: Softpedia
Plateau
I would have preferred to see a little more y/y growth for Foxconn's November revenue, but at least there was no sales decline, as the chart below shows.
(click to enlarge)
And the chart shows that sales momentum is still upward for the all-important December quarter. There's still a lot of uncertainty built into the data since we don't know precisely what the component of Foxconn's non-iPhone revenue is. For purposes of estimating iPhone costs to Apple, I'm still assuming 66% of Foxconn's revenue will be due to the iPhone for the December quarter, as I explained previously.
The problem now is to guess what the month of December holds. For purposes of estimating Foxconn's December quarter revenue, I'm assuming that revenue levels out at $16 billion for December. That puts the total quarterly revenue for Foxconn at $47.63 billion, with revenue due to iPhone at $31.4 billion.
Applying the historical gross margin of 40% yields an estimate of Apple's iPhone revenue of $52.4 billion for a y/y iPhone revenue increase of just 2.4%. However, I'm assuming a lower ASP than last year of $670, which was last quarter's iPhone ASP. This puts unit sales growth at about 5% at 78.2 million.
Deriving quantitative estimates from the Fiksu data is more difficult because Fiksu only can provide percentages, not absolute numbers. My last discussion of the Fiksu data was mostly qualitative. Fiksu's iPhone Usage Monitor continues to be the most useful for observing qualitative trends. Below I show the Usage Monitor with mouse overs to indicate the situation just after iPhone 6s/6s Plus completed first weekend sales on September 28 and the most recent Fiksu data.
(click to enlarge)
(click to enlarge)
In general, iPhone 6s/6s Plus has not increased as a percentage of the total population as rapidly as iPhone 6/6 Plus did last year. Partly this is due to the overall population of iPhones increasing y/y and partly this is just due to the fact that iPhone 6 was enormously popular and tapped into a lot of pent up demand for a large screen iPhone.
In order to try to get a more quantitative estimate of iPhone sales, I use estimates of the overall population of active iPhone devices for 9/28/15 of about 540 million (my estimate as of the last article dealing with Fiksu data) and 12/7/15 of about 575 million. I estimate based on the Fiksu data that Apple's iPhone sales were about 60.7 million units through 12/7/15, while about 25.7 million iPhones were taken out of service. Assuming that the Fiksu indicated sales pace is sustained through the end of the quarter, about 81 million iPhones will be sold by the end of the December quarter, for a y/y sales growth of 8.75%.
I regard the Fiksu numbers as a little soft, since they rely on population assumptions that are open to question. This is why I decided to use the Fiksu number as an upper bound to an estimation range for iPhone sales growth.
One conclusion from the Fiksu data that I do have fairly high confidence about is that a high percentage of the combined iPhone 6 and 6s sales are still coming from the iPhone 6 generation. This is shown in the chart below.
(click to enlarge)
The chart doesn't include sales of iPhone 5s, even though the 5s is still being sold. 5s sales appear to be a very small fraction of the total, and I wasn't able to pull out a reliable estimate of 5s sales from the Fiksu data.
Investor Takeaway
KGI analyst Ming-Chi Kuo has estimated that 70-75 million iPhones will be sold for the December quarter. My range is 78-81 million based on looking at the Foxconn and Fiksu data. Obviously, there's a lot of uncertainty in the estimation process.
I'm a little more optimistic than Kuo, based on the data, as well as my assessment of the iPhone 6s itself. Anandtech's review of the iPhone 6s clearly demonstrated that it was the highest performing smartphone currently available. The performance of the A9 system on chip (SOC) in the 6s more than justifies the premium Apple charges. Combined with new features such as 3D touch, the 6s can be expected to continue to support iPhone sales growth.
Just as importantly, Apple is offering discounted but still very popular iPhone 6/6 Plus which features the larger screen and a still very competitive A8 SOC. Based in part on the strong opening weekend reception in China, I expect Apple to be able to exceed last year's 74.47 million iPhone sales for the December quarter. The big question has been, by how much. I'll continue to monitor Foxconn, which should release its December sales figures in advance of Apple's fiscal Q1 2016 earnings report.
Overall, I consider an iPhone unit sales beat by Apple to be a very positive development for Apple which will relieve some of the downward pressure the stock has faced once Apple releases its earnings report in January.
Apple will have other sources of sales growth to show in its December quarter results as well, including Apple Watch, iPad Pro and the new Apple TV. I'll provide an end-of-year wrap up of Apple with expectations for 2016. I remain long Apple and recommend it as a buy.
Apple: Foxconn Data Points To Moderating iPhone Sales Growth
Dec. 13, 2015 1:24 PM ET | About: Apple Inc. (AAPL)
Summary
Foxconn's revenue data for November indicates continued sales growth, but at a more moderate rate.
This has caused me to lower the low end of my forecast range for iPhone sales in the December quarter.
I still expect iPhone sales growth to be at least 5% y/y for Apple's fiscal Q1.
Apple's (NASDAQ:AAPL) iPhone supplier Foxconn reported revenue for the month of November of $16.04 billion, just a 0.5% y/y increase. This still puts Apple on pace to beat the difficult iPhone sales comps of last year, but by a smaller margin. Other indicators of iPhone sales, particularly Fiksu market data, continue to point to a strong quarter. iPhone unit sales growth for the quarter appears to be in the range of 5.0-8.7%.
Source: Softpedia
Plateau
I would have preferred to see a little more y/y growth for Foxconn's November revenue, but at least there was no sales decline, as the chart below shows.
(click to enlarge)
And the chart shows that sales momentum is still upward for the all-important December quarter. There's still a lot of uncertainty built into the data since we don't know precisely what the component of Foxconn's non-iPhone revenue is. For purposes of estimating iPhone costs to Apple, I'm still assuming 66% of Foxconn's revenue will be due to the iPhone for the December quarter, as I explained previously.
The problem now is to guess what the month of December holds. For purposes of estimating Foxconn's December quarter revenue, I'm assuming that revenue levels out at $16 billion for December. That puts the total quarterly revenue for Foxconn at $47.63 billion, with revenue due to iPhone at $31.4 billion.
Applying the historical gross margin of 40% yields an estimate of Apple's iPhone revenue of $52.4 billion for a y/y iPhone revenue increase of just 2.4%. However, I'm assuming a lower ASP than last year of $670, which was last quarter's iPhone ASP. This puts unit sales growth at about 5% at 78.2 million.
Deriving quantitative estimates from the Fiksu data is more difficult because Fiksu only can provide percentages, not absolute numbers. My last discussion of the Fiksu data was mostly qualitative. Fiksu's iPhone Usage Monitor continues to be the most useful for observing qualitative trends. Below I show the Usage Monitor with mouse overs to indicate the situation just after iPhone 6s/6s Plus completed first weekend sales on September 28 and the most recent Fiksu data.
(click to enlarge)
(click to enlarge)
In general, iPhone 6s/6s Plus has not increased as a percentage of the total population as rapidly as iPhone 6/6 Plus did last year. Partly this is due to the overall population of iPhones increasing y/y and partly this is just due to the fact that iPhone 6 was enormously popular and tapped into a lot of pent up demand for a large screen iPhone.
In order to try to get a more quantitative estimate of iPhone sales, I use estimates of the overall population of active iPhone devices for 9/28/15 of about 540 million (my estimate as of the last article dealing with Fiksu data) and 12/7/15 of about 575 million. I estimate based on the Fiksu data that Apple's iPhone sales were about 60.7 million units through 12/7/15, while about 25.7 million iPhones were taken out of service. Assuming that the Fiksu indicated sales pace is sustained through the end of the quarter, about 81 million iPhones will be sold by the end of the December quarter, for a y/y sales growth of 8.75%.
I regard the Fiksu numbers as a little soft, since they rely on population assumptions that are open to question. This is why I decided to use the Fiksu number as an upper bound to an estimation range for iPhone sales growth.
One conclusion from the Fiksu data that I do have fairly high confidence about is that a high percentage of the combined iPhone 6 and 6s sales are still coming from the iPhone 6 generation. This is shown in the chart below.
(click to enlarge)
The chart doesn't include sales of iPhone 5s, even though the 5s is still being sold. 5s sales appear to be a very small fraction of the total, and I wasn't able to pull out a reliable estimate of 5s sales from the Fiksu data.
Investor Takeaway
KGI analyst Ming-Chi Kuo has estimated that 70-75 million iPhones will be sold for the December quarter. My range is 78-81 million based on looking at the Foxconn and Fiksu data. Obviously, there's a lot of uncertainty in the estimation process.
I'm a little more optimistic than Kuo, based on the data, as well as my assessment of the iPhone 6s itself. Anandtech's review of the iPhone 6s clearly demonstrated that it was the highest performing smartphone currently available. The performance of the A9 system on chip (SOC) in the 6s more than justifies the premium Apple charges. Combined with new features such as 3D touch, the 6s can be expected to continue to support iPhone sales growth.
Just as importantly, Apple is offering discounted but still very popular iPhone 6/6 Plus which features the larger screen and a still very competitive A8 SOC. Based in part on the strong opening weekend reception in China, I expect Apple to be able to exceed last year's 74.47 million iPhone sales for the December quarter. The big question has been, by how much. I'll continue to monitor Foxconn, which should release its December sales figures in advance of Apple's fiscal Q1 2016 earnings report.
Overall, I consider an iPhone unit sales beat by Apple to be a very positive development for Apple which will relieve some of the downward pressure the stock has faced once Apple releases its earnings report in January.
Apple will have other sources of sales growth to show in its December quarter results as well, including Apple Watch, iPad Pro and the new Apple TV. I'll provide an end-of-year wrap up of Apple with expectations for 2016. I remain long Apple and recommend it as a buy.
