Analyst: Apple’s OLED iPhone just has to be ‘cool enough’ at $1,000

“Nomura’s Jeffrey Kvaal today reiterates a Buy rating on shares of Apple [and ups his AAPL price target] to $185 from $175, after bumping up his P/E multiple on the stock, arguing that the impending debut of the next iPhone means the company can sell a lot more units than expected, assuming the device is ‘cool enough’ to sell at prices of $1,000 or more,” Tiernan Ray reports for Barron’s.

“Kvaal’s own estimate for how many iPhones Apple may sell in its fiscal year that starts next month is 268 million units, which is above the consensus for 247 million, he writes,” Ray reports. “Among the factors playing to Apple’s favor as its ‘installed base’ of users of the iPhone will be 60% higher at the end of this month than it was three years ago when the iPhone 6 came out.”

We believe the iPhone user base will end FY17 with ~663mn subscribers. This estimate is ~65% above our estimate of the iPhone user base entering the iPhone 6 cycle which was ~400mn. We consider these approximate figures, as Apple does not disclose them. Apple does, however, offer clues with occasional comments about iOS user base growth or switchers coming from Android. Apple noted earlier this year that its iOS user base was growing in the “strong double digits”, which we equate to 15-20%. iPhone units are, of course, a clue in and of themselves. We corroborate our assumptions with iOS App Store download data from SensorTower. We interpret the slightly up (+4% y/y) number of unique iOS App Store downloads as a signal that Apple’s user base continues to grow at a constant 10-15%, if not higher. SensorTower counts only downloads from new users; downloaders from existing users upon purchase of a new phone do not count. Thus, a steady download figure means a steady rate of new users entering the iOS platform. — Nomura analyst Jeffrey Kvaal, September 6, 2017

Read more in the full article here.

MacDailyNews Take: It’s all going to be contingent on whether Apple can get enough assembled to achieve supply/demand balance. We expect the OLED iPhone supply to be severely constrained for many months.

26 Comments

      1. Actually, two units … as I can’t get my wife to give up her 5, even though its battery is almost dead.

        She hates the larger sizes (and yes, I’ve been suggesting the SE…to no avail).

        But the bottom line still remains that if the consumer doesn’t see sufficient product value, they’re not going to rush out to buy. For example, I’m becoming increasingly disillusioned (aka “pissed off”) with having to manage the batteries in wireless devices, so if I were to lose/break either of my 6s’s today, I’d replace them with the same and not a 7, in order to keep the earphone jack. For a single NYC-Sydney flight, a set of Airpods would have to be recharged 3x.

          1. Sydney was chosen for its dramatic effect, not because it is untrue. The reality is that even a mere Trans-Atlantic flight exceeds the battery life of the AirPods … as does a domestic Coast-to-Coast flight too.

            Overall, for a lot of us, spending over six hours in transit on business (+personal) travel is fairly commonplace. For example, I’m personally booked for four (4) such “long” itineraries within the next 60 days, even though my travel is down from a few years ago.

            1. (Accidental early send…continuing): Similarly, I have friends & colleagues who travel a lot more than I do. One is taking a break right now because his mother had a stroke this summer, but he’s a million miler on two different airline FF programs. The basic reality is that batteries require care & feeding … a trip we took last fall to Africa ended up carrying IIRC eight distinct battery chargers, and a Caribben trip this spring had five (should have been six, but had forgotten to include the charger for the noise-cancellation headset). And because of baggage theft, these have to go in carry-ons.

            2. Your complaints are silly, put the AirPods in the case after 5 hours and they’ll be fully recharged before you know it. Blasting sound into your brain constantly is unhealthy.

            3. > Your complaints are silly…

              Just because you believe that, doesn’t make it so.

              For maximum protection, I’ll wear a set of earplugs, covered by a set of over-the-ear headphones with NC: this is a pretty reliable setup for getting -30dB worth of attenuation.

              > Blasting sound into your brain constantly is unhealthy.

              Good thing I previously mentioned that I use headsets which have active Noise Cancellation circuitry …

              … too bad the AirPods don’t have Noise Cancellation, eh?

              You see, what’s actually silly is to be a blind fanboy who runs out to buy stuff that does not best suit your actual needs.

            4. > keep moving the goalposts…

              Nope, my stated use case has not budged.

              > I use my QC 35s …

              If that had been stated on your very first post, your claim might be believable. Too late now.

  1. For me, it will be contingent on how good Face ID works. It sure as hell better be swift and effortless in virtually every scenario, because that’s exactly what I’ve experienced for the past four years with Touch ID.

  2. I’m buying it. The most expensive one. Price doesn’t matter. I hope I can pre-order next week! And when the speaker thingy ships I’m getting some of those too. I’m only undecided on Watch3. Might be time for a Mac or an iPad Pro too depending on what exactly is announced.

  3. If the articles are true, I’ve read a few articles telling Samsung’s OLED display panels costing Apple about $130 or $75 more than the older LCD panel and that combined with other newer tech makes sense to me that the top-tier iPhone is going to be more expensive. I would probably opt for the 256GB model so that would be an extra $100 over the base model price. It seems reasonable to me if I could get three years use out of an iPhone.

    Because I’m an Apple shareholder, whatever they charge is a win-win situation for me so I don’t have a beef. I’m sure most people view the cost from a different perspective and I understand it.

    I still don’t see why the $1000 cost keeps being mentioned whenever there’s an article about the high-end iPhone. It is what it is, so what’s the point. No one is being forced to pay that amount for an iPhone. It’s the consumer’s decision if they want that high-end model. Is it cool enough to cost that much? It probably will be, but we’ll only know for sure if Apple can’t keep it in stock.

    Of course, the naysayers will claim Apple is deliberately keeping demand high by keeping the supply low. That just seems stupid to me because I wouldn’t do that if I had a business. I’d try to sell as much as I could produce to satisfy demand.

    I feel confident Apple will do brisk sales over the holidays, so I have no concerns at all.

    1. Sure, there is the cost of new tech influencing expenses, but OLED has been around for long enough for there to have been the manufacturing technology investments made to improve yield & reduce unit costs to hit target points. As such, I don’t particularly buy claims of a +$130 price increase when competitors are retailing smartphones with the core tech for $300 (retail).

      Nevertheless, my concern has been more broadly the ongoing growth up in Apple’s ASP – – which has been happening also at the bottom of Apple’s prices as well as at the top. Overall, this is increasing the risk for Apple to be the disruption victim…

      …which is why as fellow Apple stockholder, I see these “$1000 iPhone” stories as a concern, particularly with their increased reliance on iOS which makes them increasingly fragile. Yes, even with the growth in Services, because those services are invariably linked primarily back to iOS too.

      Reason being that public perceptions & opinions on what constitutes a “good value” can be very fickle (and not even reliant on the truth). And granted, there is this ‘cool enough’ factor which is a factor, but even if the public is in love and drooling for the Next Great Thing, there’s still a limit to how much the average (or above average) consumer can realistically afford … which is why we’re not also all driving Porsches.

      1. Read more carefully – the estimate was $75 more than standard LCD display, not $130. There is other tech in the iPhone 8 Edition which will also drive the price higher than the previous generation of iPhones.

        I concur with many others that the higher price bothers me a bit. After years of keeping the iPhone price fairly constant and providing more for the money on each iteration, the ‘plus’ phones started a trend towards the $750+ range. Still, in comparison with Samsung’s flagship phones, the estimated prices for the new iPhone 8 models remain competitive. I recently saw a price of $929 for the Samsung Note 8.

        1. Oh, I understand that there’s a range ($75 – $130) and that the claim may be of just the display, or it plus a bunch of stuff. However, when cost estimates based on teardowns suggest that the entire hardware cost of an iPhone is ~$220 (and the display portion only in the ballpark of $40), even “$75” as a low end is indicating a tripling in cost of said component. For Apple, that sounds pretty unpalatable … unless they’re really confident that they can pass that cost along.

          And similarly, I do recognize that there’s rough parity between Apple and Samsung’s “flagship” models – – but the basic problem there is that Apple’s competitors have a lot of low- to mid- range product offerings, whereas the only thing that Apple has below the $550 iPhone6s is the SE at $400.

          Overall, this still comes back to the question of the value paradigm for the customer base, and at what point does too much become too much. When you start to see households who are earning {2x – 3x – 4x} the US Median Income expressing pushback, your product is narrowing to only serve the 1%.

  4. Yupperz, I foresee them flying off the shelves. I’m getting the top model iPhone and an Apple watch to boot. I may hold off in the homepod for a year. I see these articles, on price point, as an attempt to downplay and manipulate opinion, but when released….. “flying off the shelves” 🙂

  5. I’m paying $45/month on the 24 month plan for my almost one year old iPhone Plus 256GB in Jet Black. My plan always was and remains to upgrade to the next best iPhone when it comes out. I will be putting my order in as soon as I can. So what if my monthly payments go up $5/month. Pocket change.

  6. I’m paying $45/month on the 24 month plan for my almost one year old iPhone Plus 256GB in Jet Black. My plan always was and remains to upgrade to the next best iPhone when it comes out. I will be putting my order in as soon as I can. So what if my monthly payments go up $5/month. Pocket change.

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