Apple Inc. (NASDAQ:AAPL)’s iPhone 6 was a huge success story with over 10 million sold handsets in the first weekend after launch on September 19. It was quite natural to believe that the availability of handsets was a concern right after the launch, but after more than two months the story remains the same. The consumers who booked their iPhone 6 or iPhone 6 plus handsets had to wait for more than 3-4 weeks to get it. What’s the reason behind these delays? Piper Jaffray’s Managing Director, Gene Munster talked on Bloomberg TV about the iPhone 6 demand.
Munster mentioned that larger wait times for Apple Inc. (NASDAQ:AAPL)’s iPhone 6 and iPhone 6 plus is quite common and it varies with carriers as well. He added that some carriers have good inventories, which allows them to deliver handsets at lower wait times. He feels that the demand is much higher than what people had thought and that might be the reason for larger wait times.
“[…] ultimately, one thing we can do is, just measure at the Apple stores, how much inventory that they have of phones. So typically two months after a product launch they should have about a 100% of this queue’s in, but right now it’s about 60%. So, it’s still lagging, surprisingly two months after the product release it’s still not widely available,” Munster said.
Munster feels that the availability issue is not due to the problems with production cycle or issue with component manufacturing. He said that Apple Inc. (NASDAQ:AAPL)’s conference call did not suggest about any of these problems. He added that the availability issue is mainly due to consistent increase in demand for iPhone 6 and iPhone 6 plus.
Munster added there is a shift in supply pressure between iPhone 6 and iPhone 6 plus from the first few weeks. He said that the early adopters would like to get their hands on the larger iPhone 6 plus, which increased the supply pressure on that model, but he feels that as the days rolls on, the supply pressure starts mounting on the smaller iPhone 6, which is supposed to be the mainstream product. He added that in a year from now, 60-70% of units might be smaller iPhone 6.
Munster said that gross margins from both iPhone 6 and iPhone 6 plus are comparable for Apple Inc. (NASDAQ:AAPL), but he added that the gross profit dollars are lower for iPhone 6 mainly due to the lower Average Selling Price (ASP) for that model when compared to iPhone 6 plus. He thinks that Apple Inc. (NASDAQ:AAPL) would be happy to sell both the models, but would be happier to sell a lot of iPhone 6 plus when compared to iPhone 6.
He thinks that Apple Inc. (NASDAQ:AAPL)’s guidance that they set in October for the last quarter of 2014 was made considering the production capability, which might not be enough to meet the demand pressure for the quarter. But he feels that it is a good thing for Apple Inc. (NASDAQ:AAPL), since it pushes the peak of cycle somewhere into the first quarter of 2015, which would keep investors holding onto them a little longer.
iPhone 6 plus tops the list for Smartphone with best cameras, which might be an additional factor to push the consumers to buy them.
Disclosure: None
Let Warren Buffett, David Einhorn, George Soros, and David Tepper WORK FOR YOU. If you want to beat the low cost index funds by an average of 6 percentage points per year look no further than Warren Buffett’s stock picks. That’s the margin Buffett’s stock picks outperformed the market since 2008. In this free report, Insider Monkey’s market beating research team identified 7 stocks Warren Buffett and 12 other billionaires are crazy about. CLICK HERE NOW for all the details.
