During the company’s fourth-quarter earnings call, Apple Inc. CEO Tim Cook warned that the demand for the iPhone 6 and 6 Plus is far outstripping supply. The company’s suppliers have ramped up production of the iPhone 6 and 6 Plus, but the available supply is nowhere close to demand. So, the new iPhones could be a tough smartphone to find during the holiday shopping season.
iPhone 6 to drive a long upgrade cycle
It will push some of the sales to March quarter. However, Morgan Stanley analyst Katy Huberty argues that the iPhone 6 demand will remain robust even in FY2016. She says, in the near term, only about 50% of the 250 million iPhone 4S and older model users are likely to upgrade this year. So, the upgrade cycle will have plenty of room in 2015 and 2016.
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What’s more, if Apple Watch and Apple Pay prove popular, we could see even more iPhone 6 upgrades in 2015 and 2016. During the September quarter, Apple sold 39.3 million iPhone units. Morgan Stanley’s retail checks indicate that the tech giant has addressed many of the early supply constraints. But the supply will still fall short of demand. That’s because the iPhone 6 and 6 Plus are currently available in 32 countries, and will reach 115 by the end of this year. Demand from additional countries will only add to supply shortages.
Huberty believes Apple will build up its new iPhone inventory by March 2015. It could then lead to massive upgrades, generating more revenue than typical for that period. The research firm says Apple has gained some market share in China from last year. The company is expected to gain further, mostly at the expense of Samsung. What’s more, Huberty says Apple will gain share in the U.S. and Australia as well.
Morgan Stanley reaffirmed its Overweight rating on Apple and upped the price target from $110 to $115. Separately, JP Morgan analyst Rod Hall said in a research note that the Cupertino company continues to execute exceptionally well despite the tougher economy. Hall expects the company to sell 65 million iPhones during the current quarter.
Apple shares rose 0.67% to $103.17 at 12:54 PM EDT on Wednesday.