iPhone X Lead Times Suggest Strong Demand

This morning Apple began taking iPhone X pre-orders at 3am ET. Current lead times are 5-6 weeks, in line with our expectation of 4-6 week lead times by 8am this morning. Long lead times are attributed to production bottlenecks (screen and TrueDepth camera). Based on previous years, we expect little change in lead times over the next week. We expect lead times of 4-6 weeks for the month of November. We believe the iPhone X will reach global supply-demand equilibrium sometime in the March quarter, or 3-4 months after launch. Typically it takes 2-3 months for a new iPhone to reach global supply-demand equilibrium.

A night tracking long lead times. We checked iPhone X lead times 8 times since pre-orders began at 3am, outlined in the table below. The site actually went live at 3:04am, and by 3:17am, lead times had increased to 2-3 weeks, 3:38am 4-5 weeks, 5:19am 5-6 weeks, and has remained consistent since then.

Comparing and Interpreting the Lead Times. While far from an exact science, we want to give a framework about how we are thinking about lead times. Current lead times are 5-6 weeks, which we view as a sign that demand for the iPhone X is trending more favorable than investor expectations. Previously we had published that if lead times were below two weeks by Sunday, Oct 29, we would have viewed that as negative for initial iPhone X demand.

iPhone X Will Make Or Break Story Over The Next Year. The iPhone mix and ASP will be the biggest driver of AAPL shares in the next year, which we expect to be favorable to the story. At first take the $1000 starting price iPhone feels like a deal breaker. We think that’s a fallacy, and consumers will take a step function jump in what they’re willing to spend on an iPhone given most buy their phones on installment plans. week we raised our estimates on AAPL with our updated model (here).  For FY18, we raised our iPhone ASP to $740 vs. Street at $696 (up 15% y/y), revenue to $273 billion vs. Street at $265 billion, and EPS to $11.25 vs. Street at $11.05.  We’re moving 7m iPhones from Dec-17 (now at 77.5m vs. Street at 82m) to Mar-18 (now at 64.5m vs. Street at 61m) to account for production constraints of the iPhone X. For FY18 we’re expecting 238m iPhones, up 9% y/y vs. Street at 242m.

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