Apple shares are on the rise today as another analyst has a fresh set of data from an iPhone 8 survey. He found signs of extremely pent-up demand in China but also warned that Apple may not be able to price the iPhone 8 more than $50 higher than the current price of the newest models.
Meanwhile, multiple analysts are weighing in on Jabil’s guidance for its August quarter and what it means for Apple’s tenth anniversary iPhone.
Apple target price raised for iPhone 8 survey
Maxim Group analyst Nehal Chokshi shared the data from his May iPhone 8 survey in a note to investors dated June 19. After analyzing the data, he boosted his target price for Apple from $171 to $180 per share. He explained that the iPhone 8 survey points to “significant pent-up demand” in China from both new and current users of iPhones.
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The survey indicated that iPhone units in Greater China will surge by up to 170% year over year. He also explained that anecdotally, he has heard that since Chinese consumers are much closer to Apple’s supply chain, they heard about the iPhone 8’s expected new features much earlier in the developmental process than American consumers heard. He also said that his iPhone 8 survey supports this anecdote because the percent of current iPhone users who bought an iPhone within the last 12 months and plan to buy one within the next 12 months fell to 7.6% in May 2017 from 11% in May 2016.
Can Apple win China back?
Apple has really been struggling in Greater China as its sales there have been plunging for about the last year. Given that much of the company’s supply chain is in China, it may very well be that consumers there started holding back their iPhone purchases much earlier than consumers in other parts of the world did.
Analysts have been debating whether Apple can convince Chinese consumers to buy iPhones again, but if Chokshi is correct, it shouldn’t be very difficult. He’s now expecting iPhone units in Greater China to jump 120% year over year in fiscal 2018. He gave his estimate a bit of a haircut from the 170% growth indicated by his iPhone 8 survey because he believes that Apple has failed to take share toward the lower end of the price range.
He noted that the iPhone SE hasn’t been refreshed in five quarters and probably won’t be until September. As a result, Oppo and Vivo have been beating the iPhone SE at the low end.
Apple expected to raise iPhone 8 price for augmented reality
We’ve been hearing for quite some time that Apple plans to price the iPhone 8 as high as $1,000 or possibly even more, but there is a limit to how much the company can charge before Chinese consumers decide not to buy. According to Chokshi’s iPhone 8 survey, that limit is a price increase of only about $50. He estimates that Apple’s bill of materials for the iPhone 8 will probably rise by $20 to $35, assuming the new OLED display, wireless charging, an Infinity screen and a depth sensing module for augmented reality.
The analyst’s iPhone 8 survey indicates that about 10% of participants who plan to buy an iPhone in the next 12 months have a price sensitivity to a $50 price increase or less. As a result, he said if Apple raises the price of the iPhone 8 by $50, it wouldn’t sell as many iPhones but it would make a higher gross profit. However, he added that his iPhone 8 survey indicated all consumers at all price points, including the iPhone SE price range.
Jabil guides to a strong iPhone ramp
Last week, Jabil offered guidance for its August quarter, and most analysts agree that it calls for a robust ramp of casings for this year’s iPhone models. Stifel analysts said the guidance points to between 35% and 40% sequential sales growth for Jabil’s top customer Apple. Longbow analysts also see Jabil’s ramp as a bullish sign that the iPhone 8 will dominate unit sales this fall, which should be good for gross margins because it is expected to be more expensive than the iPhone 7s and 7s Plus.
Apple stock surged by about 3% during regular trading hours on Monday, climbing to as high as $146.74.