Apple Analysts Give the Bull and Bear Cases For iPhone 11 Demand

Apple opened preorders of its new iPhone 11, iPhone 11 Pro, and iPhone 11 Pro Max on Friday. Now Wall Street analysts are trying to weigh early consumer demand for the devices, a key indicator of the company's future financial results and stock performance.

Like is often the case, they don't agree.

For its part, Apple doesn't disclose preorder figures. Moreover, earlier this year, the company stopped reporting in its quarterly earnings how many iPhone it sells, thereby creating some mystery around what had been a slumping business.

Of course, Apple hopes that the iPhone 11, iPhone 11 Pro, and iPhone Pro Max, which will begin shipping on September 20, will reverse that trend. And so do investors.

The bull case

In a research note on Sunday, TF International Securities analyst Ming-Chi Kuo said that iPhone 11 preorders have been "better than expectations" while increasing his forecast for shipments worldwide. This year, he expects Apple to ship 70 million to 75 million iPhone 11s, up from his previous estimate of 65 million to 70 million.

Kuo based his analysis on iPhone 11 preorders from Apple's own website and the shipping dates that Apple provides to customers who order new iPhone 11s.

Kuo's numbers don't include orders from wireless carriers like AT&T, Verizon, and others. He said their preorder figures from those don't provide much insight into Apple's overall consumer demand.

"Apple’s official website is better to reflect the actual demand because Apple’s official website accounts for 30–40% of the total iPhone shipments," Kuo wrote.

In particular, Kuo said that demand for Apple's iPhone 11 Pro models, which start at $999, is strong. He attributed that to Apple's trade-in programs, which gives customers credit on the phones they trade in to help defray the cost of new devices, as well as Apple's iPhone Upgrade Program, which lets customers spread payments for new iPhones over 24 months.

Meanwhile, Wedbush Securities analyst Dan Ives also said that demand for Apple's new iPhones is robust. The iPhone 11's starting price of $699, which is $50 cheaper than the iPhone XR it's replacing, makes it a more attractive option for shoppers, he said.

"IPhone 11 pre-order demand looks good out of the gates," Ives told investors. Like Kuo, Ives believes Apple will ship 75 million iPhone 11s this year.

The bear case

Some Apple analysts have a more pessimistic opinion about iPhone 11's consumer appeal. Rosenblatt Securities analyst Jun Zhang, for example, said that iPhone 11 preorders in the U.S. and China are down by as much as 20% compared to last year's iPhone XS, iPhone XS Max, and iPhone XR.

He said that the number of iPhone 11 preorders is 15% lower than iPhone XR preorders. The iPhone XS and iPhone XS Max had 20% more preorders than the iPhone 11 Pro and iPhone 11 Pro Max, Zhang added.

Zhang didn't say how many iPhone 11s Apple would ship in 2019, but he estimated that Apple would ship 18.5 million iPhone 11s by the end of September. Apple shipped a combined 14.9 million iPhone XS and iPhone XS Max in September 2018, and 10 million iPhone XR in October 2018.

Questions Remain

So, who should we believe? Only Apple knows with certainty what its iPhone preorders are like this year. But there are some points of context that may be helpful.

For one, Kuo argued in his research note that "it's meaningless to compare the 2019 first-weekend preorder with 2018." Three versions of the iPhone 11 are being released simultaneously while, last year, two phones were debuted together followed by a third a month later.

In terms of future stock performance, analysts disagreed about the trajectory of Apple's shares. On Monday, for the record, they rose 0.5% to $219.90.

Ives, who has an "outperform" rating on Apple's stock, has a 12-month price target of $245.

Meanwhile, Zhang, the pessimist, on Monday reiterated a sell rating on Apple shares. He has a 12-month price target of $150 on Apple's stock, well below its current price.

Overall, the 32 analysts who track Apple have an average price target of $223.93 on Apple's shares, indicating there's moderate upside to investing in Apple's stock now.

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