Apple’s Price Is Right for iPhone 7
A higher average selling price for new iPhones could pay off well
It would really be nice if Apple sold more iPhones in the year ahead, but the company has other ways to give its flagship business a boost.
The iPhone 7 went on sale a little more than two weeks ago. Apple is no longer giving out early sales figures. Still, some signs are pointing to decent demand. Those same signs also suggest Apple may see an uptick in the average selling price of the iPhone, which benefits both the company’s top and bottom lines.
Apple needs both. The company wrapped its latest fiscal year on Sept. 24. While final results won’t be reported for a few more weeks, it will be the first time Apple has seen fiscal year drops in both revenue and net income since 2001. That is mostly because last year’s iPhone 6Hopes are currently modest. Wall Street expects iPhone unit sales to grow 5% for the current fiscal year. But Apple made some changes that also could lift the smartphone’s average selling price. The company raised prices on all versions of the larger iPhone 7 Plus by $20. And a glossy new color called Jet Black is available only in higher memory configurations.
Those models all seem to be in demand. In a survey of Apple Stores on Friday, Gene Munster of Piper Jaffray noted that only about 8% had availability of the larger iPhone 7 Plus models compared with 61% for the smaller-screen versions. Supply is likely still very limited, though analysts at both Pacific Crest and Cowen & Co. noted Monday of a “slight uptick” in production activity for the iPhone—which doesn’t suggest weak demand.
In any case, higher average selling prices tend to pay off for Apple. The iPhone 6 boosted Apple’s average iPhone selling price by 11% in fiscal 2015. Revenue and net income jumped 28% and 35% for the year, respectively.
There is room for another surprise here. Analysts are currently projecting the iPhone’s average selling price to decline by 1% for the current fiscal year. Toni Sacconaghi of Bernstein estimates that if iPhone’s average selling price came in 3% higher than Wall Street’s current target, that would make up for a six million unit shortfall in iPhone sales.
Enough, in other words, to help Apple dial up a better year.S generated weaker demand. So the company needs this year’s offering to do better.