Analysts: iPhone 5 Sales Within Realistic Expectations

| Apple Stock Watch

While much ado has been made out of Apple "only" selling 5 million iPhone 5s in the opening weekend of sales, some analysts have hailed the achievement, saying that expectations of much higher unit sales weren't realistic. Sterne Agee analyst Shaw Wu and Barclays analyst Ben Reitzes both issued research notes on Monday saying that sales of the iPhone 5 are limited by supply, not demand.

Apple announced Monday morning that it sold 5 million iPhones, and that the company sold out of its "initial supply." CEO Tim Cook that stores are continuing to receive regular shipments of new units, and that estimated delivery dates for online orders are accurate.

"Demand for iPhone 5 has been incredible and we are working hard to get an iPhone 5 into the hands of every customer who wants one as quickly as possible," Mr. Cook said in a statement.

Many took this announcement as disappointing, even though it represented a new record for opening weekend iPhone sales. The iPhone 4S sold 4 million units in its opening weekend, which was itself a record.

The problem is that some analysts were predicting numbers as high as 10 million units for the opening week, while others were in the 6-8 million unit range. Those estimates—and Apple's own pre-order numbers—sent the stock higher in the two weeks leading up to the iPhone announcement, while Apple's announcement on Monday morning took some of those gains back off the table.

Shares of AAPL ended the day at US$690.79, down $9.305 (-1.33 percent), on heavy volume of 22.8 million shares trading hands, as shown in the chart below.

AAPL Chart

Source: Yahoo! Finance

Sterne Agee analyst Shaw Wu was uncharacteristically blunt in his research note on Monday, telling clients that, "We are not overly concerned with this 'disappointing' number as we believe this is a classic case of near- term expectations getting out of touch with reality. We find it unfortunate that some analysts continue to publish irresponsible estimates without taking into account realistic demand trends and potential supply constraints on new in-cell touchscreens."

Analysts don't typically talk smack about competing analysts. While he avoided naming names, Mr. Wu's comments can comfortably be read as a slam on those analysts who had been calling for higher opening weekend iPhone unit sales.

He added that he remained comfortable with his own quarterly estimates of 27 million iPhones during the September quarter and 46.5 million during the December quarter.

"We continue to believe iPhone 5 will put a lot of pressure on competitors where it will incrementally capture a portion of customers attracted to larger screens and/or 4G LTE wireless," he wrote.

The analyst also maintained his price target of $840 per share and reiterated a "Buy" rating on AAPL.

Ben Reitzes of Barclays was a bit more circumspect in his note, but did tell clients that, "Today’s announcement [from Apple] fits with our view that Apple would only be able to ship limited quantities in the September quarter."

That's a nice way of saying, "Ahem, we...ummm...told you how it was gonna be."

Mr. Reitzes said that Apple's supply bottleneck is the move toward in-cell display technology, "which pushes a significant amount of units into the December and March quarters – a factor which limited sales this past weekend according to our checks."

The in-cell display technology he's talking about was part of how Apple made the iPhone 5 thinner than its predecessor, but it's a relatively new technology and Apple has gobbled up much of the available supply of the corresponding components.

Mr. Reitzes said he expects a significant ramp and improved availability for the December quarter. He is estimating 45.21 million iPhone units for that quarter, and then again in the March quarter. If Apple can have flat sales quarter-over-quarter sales from the holiday season to the beginning of 2013, it will be a big achievement for the company. Mr. Reitzes is estimating 170.7 million iPhones for the fiscal 2013, which ends in September.

The Barclays analyst maintained his $810 price target on AAPL and an "Overweight" rating, the equivalent to a "Buy."

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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These two analysts have Apple dialed in, and are among the first that we pay attention to. Take that for what it's worth, of course.

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Why do you guys keep siting Gene Munster? The guy is just out to manipulate Apple stock price…

Constable Odo

Gene Munster will be the death of Apple.  He’s making up fictitious expectations merely to short Apple stock when the expectations fall short.  That man cannot be trusted with his outrageous prognostications.

In the normal world maybe selling 5 million of any product would be some sort of record and be praised but this is Wall Street we’re talking about.  Wall Street basically takes the highest estimates anyone can give and that sets the bar.  Anything less will be perceived as failure.  Apple failed big time because Munster set the bar very high.  Munster’s ‘worst case’ scenario had Apple selling 6 million iPhone 5s.  His high estimate was close to 10 million iPhones sold over the weekend.  Apple’s measly 5 million missed by a country mile and shareholders got totally screwed.

Unfortunately, Munster cannot be fired due to ignorance but the investor note he sent out to clients should have had them up in arms after the stock tanked this morning.  I wouldn’t trust anything that comes out of his mouth.

I guess partial blame can be put on Tim Cook for his inability to control the supply chain.  Apple may be getting too far ahead of itself in technology that’s too difficult to manufacture in sufficient yields.  Hopefully it will be sorted out in time, but meanwhile, shareholders are going to pay the price.  Apple’s reliance on hardware sales alone is going to cause further shareholder grief down the line.  Apple desperately needs to get into the banking business with all the reserve cash sitting around doing nothing.

Shareholders might as well say goodbye to $800 in 2012 and hope it happens in mid-2013.  I sure hope the iPad Mini can help boost Apple’s share price, but I’m not holding my breath.


Anyone who buys and holds AAPL should not be bothered by these ups and downs even if they are the result of inflated analysis. This stock is still trending up.

As far as Munster or the others being over zealous goes; some will make money by their advice because of the swing in the stock’s price. Does anyone think those who turn a quick profit will hate that these experts make such outlandish predictions? But for those who lose because they believe these numbers there will anger. They probably should stick with mutual funds or something safer.

I really don’t know how anyone could really believe that Apple would have 10 million iPhone 5’s sitting in stores ready to be bought in one weekend.



I think, in fairness, this has become (almost) a case of much ado about nothing - at least one can argue such if the stock price recovers yesterday’s losses in the next day or so.

Yesterday, Gene Munster acknowledged his role in this misalignment (debacle might be strong of a word - again much depends on the Street’s near-term behaviour), and pointed out in an interview with Bloomberg West that the ‘miss’ was supply and not demand related. In his defence, Apple provided no guidance on supply. He and others went on to point out that, if one factors in orders, which are not sales and therefore cannot figure into the final weekend count, it does come to within the ballpark that Mr Munster provided - in fact, likely mid-range (7 - 8 M units).

It is difficult, when using limited data, to make accurate predictions, and that is why statisticians use confidence intervals; the wider the greater the degree of uncertainty. That Munster is respected by both the industry and, that truest of all tests of credibility, his colleagues, speaks to his overall record of being more accurate than most, and more often quantifiably right than wrong.

My intent is not a defence of Gene Munster, he can handle himself, but rather to point out that the press focussed on the number and neither the methodology nor the assumptions and explanatory variables behind them. Hopefully, today both press and investors will take a broader, more complete and balanced view of iPhone sales performance, which if done, will indicate that there is plenty of headroom for iPhone sales break yet more records in meeting an unprecedented level of global demand.

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