How Big a Bump Will New iPhones Add to Apple’s Fourth Quarter?
With just a few days to go now before Apple unveils its next-generation iPhones, analysts are tweaking their models in an effort to gauge how much impact the new devices will have on iPhone sales in the company’s next few quarters.
Among those weighing in at week’s end is Pacific Crest analyst Andy Hargreaves, who thinks the new iPhones Apple will debut on Tuesday will drive significant sales volume — particularly if they’re announced in concert with new distribution deals with big international carriers like China Mobile and Japan’s NTT DoCoMo.
“We expect Apple to launch two new iPhones at its Sept. 10 event, an iPhone 5S and an iPhone 5C, which we believe is essentially an iPhone 5 with a different case,” Hargreaves said in a note to clients. “We expect these refreshes, along with the potential for incremental distribution of the iPhone, to drive improved unit volume, stabilized gross margin and accelerating operating profit in the coming quarters.”
For Hargreaves, that means fourth-quarter iPhone sales of 31 million iPhones. Of those, he figures 10 million will be the new models. That’s a big number, considering the limited number of selling days left in the quarter, but Hargreaves feels it could go higher still — to 13 million, with some “extremely efficient supply chain management.”
Either way, that’s a potential record. Assuming that the new iPhones arrive at market on the Sept. 20, Apple will have just nine days to sell them before quarter’s close. Ten million new iPhones sold in nine days is three million more than the seven million iPhone 5 units Apple is estimated to have sold during the nine-day period at the end of fourth-quarter 2012.
Looking ahead to Apple’s first quarter, Hargreaves sees iPhone shipments of 50 million. Caveat: Those shipments will likely be quite a bit higher if Apple does ink the distribution agreements with China Mobile and NTT DoCoMo I mentioned earlier. Those are big deals with serious upside: China Mobile currently boasts a subscriber base of 700 million, and NTT DoCoMo’s is 60 million. If Apple has indeed landed them, Hargreaves figures it will ship an additional 15 million iPhones on an annual run-rate basis, with China Mobile accounting for approximately 10 million of them*. And that, he says, may be enough to add an additional $3 of EPS next year.
*It’s worth noting that Hargreaves’s estimate of the iPhone sales volume China Mobile might drive is quite conservative in comparison to some other recent predictions. Earlier this week, ISI analyst Brian Marshall suggested that a deal with the world’s largest wireless carrier could spike Apple’s iPhone sales by 38.7 million units in calendar 2014, based on three percent penetration of the carrier’s 3G subscriber base of 180 million.