BOGO iPhone X Sales: Will More Units, Less Profit Help Apple Stock?

Updated on

Apple Inc. (NASDAQ:AAPL) management has maintained that iPhone X sales have gone better than they expected. However, there’s now another indication that all the data picked up by analysts suggesting lackluster sales is probably more accurate. Mobile carriers are beginning to boost promotions of the most expensive iPhone ever as BOGO iPhone X sales (“buy one, get one”) are picking up. At least two carriers are now offering BOGO iPhone X sales, presumably to clear some of the extra inventory.

Still, there will always be a few Apple stock perma-bulls who deny all the evidence presented by everyone else. In fact, one such analyst predicts that Apple stock will carry the company to a $1 trillion valuation this year, as he believes the current iPhone cycle is “alive and well,” despite the evidence to the contrary.

In a note this week, Canaccord Genuity analyst T. Michael Walkley maintained his $200 price target and Buy rating on AAPL stock. Whenever Apple stock does reach the $200 level, it will put the company’s market capitalization at roughly $1 trillion, so Walkley seems to expect a 13-digit market cap sometime within the next 12 months, although he didn’t focus on this prospect in his note this week.

Instead, he observed a noticeable increase in BOGO iPhone X sales among mobile carriers in the U.S. He does agree that the $1,000 price tag turned out to be a bigger-than-expected barrier to sales, but he expects the BOGO iPhone X sales to convince price-sensitive consumers to upgrade. Both T-Mobile and AT&T are now offering BOGO iPhone X sales with up to $1,000 off, and it may be a matter of time before the other major carriers follow suit.

He expects these sales to increase demand for the handset, resulting in “steady” iPhone sales in North America during the March quarter. However, it seems like these BOGO iPhone X sales are aimed at moving excess inventory, and they will take a bite out of the average selling price and pressure gross margins. Nonetheless, Walkley seems confident that the BOGO iPhone X sales will increase sales so much that his full-year unit estimate of 226 million will end up being conservative.

The other big factor that he thinks could boost unit numbers is if Apple brings some of the iPhone X’s key features to a less expensive model with an LCD. Trefis analysts said in a note this week that Apple stock could soar to $215 per share if the company releases a new less expensive iPhone model.

On Thursday, AAPL stock hovered just below the record high it reached earlier this week on the back of bullish commentary from Warren Buffett. He said this week that his firm Berkshire Hathaway has been gobbling up Apple stock more than “anything else” over the last year.

With AAPL stock sitting under $180 per share, the company’s market capitalization is hovering just over the $900 billion mark, so it’s not surprising that some analysts are getting antsy for that magical $1 trillion valuation. In a note earlier this week, GBH Insights analyst Daniel Ives talked up the current iPhone cycle, saying that it’s going well despite reports from other sources highlighting lackluster sales of the iPhone X.

He believes AAPL stock is due for a re-rating of its multiple due to what’s expected to be a “major” iPhone cycle this year marked by not two, but three new models. Ives also expects Apple stock to carry the company to a $1 trillion valuation in the next three to six months.

AAPL stock bounced around in morning trades on Thursday. As of the time of this writing, the stock is up 0.22% at $178.52 per share.

Leave a Comment

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!