The Apple Watch was slow to take off, but it looks like demand is starting to pick up now that it has actually hit the market. Also while the first half of the calendar year is usually seasonally slow for iPhone growth, it appears as if demand for the iPhone 6 and iPhone 6 Plus remains strong.
Apple set to beat iPhone estimates
Morgan Stanley analyst Katy Huberty has released the results from her latest AlphaWise Smartphone tracker and U.S. Wearables survey. She thinks Apple could actually beat estimates for the June quarter because it looks like iPhone demand is stronger than expected. (Graphs in this article are courtesy Morgan Stanley.)
At this year's inaugural London Quality Growth Investor conference, Denis Callioni, analyst and portfolio manager at European investment group Comgest, highlighted one of the top ideas of the Comgest Europe Growth Fund. According to the speaker, the team managing this fund focus on finding companies that have stainable growth trajectories with a proven track record Read More
Her smartphone tracker estimates sell-through data using analysis of web searches. The latest survey suggests demand of 53 million iPhones for the June quarter. This is particularly interesting because Apple is nearing the end of the iPhone 6 and iPhone 6 Plus cycle as many consumers are usually looking ahead to the next generation iPhone by this time of the year.
Apple’s supply chain also suggests iPhone beat
In addition to analysis of web searches, Huberty also said data from Apple’s supply chain also supports higher iPhone demand. Morgan Stanley’s Asia Tech analyst estimates 54 million iPhone builds for the current quarter after recently revising the number upward by 3 million. Huberty also points out that the firm has either maintained or revised upward iPhone builds every month thus far in the iPhone 6 and 6 Plus phone cycle because demand keeps surprising to the upside.
The analyst expects production to outpace demand in the current quarter as Apple builds up channel inventory. The company ended the first calendar quarter toward the end of its inventory target range of five to seven weeks. She assumes a week of inventory is approximately 4 million iPhones.
Huberty also increased her iPhone unit estimate for the current quarter from 46 million to 50 million. For the next iPhone cycle, she expects only a small growth rate of 4%. She added that her survey data has been following Apple management’s comments closely. The company said the percentage of the iPhone installed base that had upgraded to the iPhone 6 or 6 Plus by the end of the December quarter was “barely in the teens” and that the percentage had climbed to 20% by the end of the March quarter.
Apple Watch demand up 60%
The analyst also reports that her survey suggests demand for the Apple Watch has climbed significantly since March (about 60%). She reported that demand has climbed consistently over the last six months. She also noted that it’s important that Apple saw the greatest increase in purchase intention for the Apple Watch after the device became available for purchase in the middle of last month. Here’s a look at the latest survey results for the Apple Watch:
Her survey results suggest demand for about 50 million Apple Watches, but she sees this estimate as being bullish because of limitations in supply. Nonetheless, she did increase her base case watch estimates 20% from 30 million in the device’s first 12 months to 36 million. She still thinks the number will be conservative, however, because it doesn’t consider the rising iPhone installed base since the start of the year and assumes that only “definitely” responses convert to actual purposes.