Apple may have reached a turning point, judging by an unofficial Morgan Stanley barometer.
Analyst Katy Huberty writes Friday that
(AAPL) investors seem increasingly interested in the company’s services business, so much so that they’ve been asking her fewer questions about early iPhone XS and XS Max performance than they did during past device launches.
That said, selling iPhones remains the core of Apple’s business, and there’s always a tendency to look for initial reads into demand. Huberty cautions that it’s especially difficult to gauge trends this year given that the iPhone XR, due out later this month, is expected to be the best-selling new iPhone. Nonetheless, she finds a few data points that she thinks are somewhat helpful, and they give her a “mixed” read.
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In terms of Google search trends, things are looking pretty good this year. “Worldwide Google search intensity” is higher for this launch than it was during the iPhone X cycle, though it’s about in line with the iPhone 7 cycle, and below the intensity of the iPhone 6 launch. Huberty is encouraged that “search intensity” for the word “iPhone” is still on the rise a few weeks after the big announcement, which wasn’t the case over the past five years.
A bit less encouraging are a drop in shipment times for the iPhone XS—not particularly surprising given that the phone is barely an improvement over the iPhone X—as well as “grey market” iPhone prices in China. Grey market prices for the iPhone XS are 0% to 3% higher than retail prices, while iPhone XS Max prices are 3% to 7% lower.
“Considering that the iPhone XS does not support dual-SIM technology while the iPhone XS Max does, Apple may have forecast very low volumes in China creating a supply/demand gap that explains higher grey market prices,” Huberty writes. She thinks some Chinese consumers may be holding out for the cheaper iPhone XR, which has a slightly bigger screen than the XS and allows for dual SIM cards. That could explain the iPhone XS Max’s price on the grey market.
Huberty has an overweight rating and $247 target price on Apple’s stock.