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Apple's 9 million weekend: What the analysts are saying - u

September 23, 2013: 10:43 AM ET

Apple surprised everybody with first weekend sales of the iPhone 5S and 5C.

Friday at the Fifth Ave. Store. Photo: PED

Friday at Apple's Fifth Ave. store. Photo: PED

FORTUNE -- If any of the dozens of Wall Street analysts who follow Apple (AAPL) predicted that the company would sell more than 9 million new iPhones over their first three-day weekend, we didn't get the memo.

Here's a sample of what the analysts are saying now. More as they come in, new ones on top.

Bill Shope, Goldman Sachs: Strong start for the iOS refresh; raising estimates and target price. "Apple's first weekend sales announcement was a major surprise for us and the investors we have spoken with. Nevertheless, it also triggered quite a debate about how much this changes the long-term story for Apple and how much of the 9 million units represented 'real demand'... Apple used the same sales recognition policies it has always used, so from an accounting perspective it is perfectly comparable to last year's first weekend sales of 5 million units... Nevertheless, there were four key differences with this year's launch that make fundamental demand comparisons more difficult... All of these factors were known before the device launch, however, so the 9 million unit shipments should be largely comparable to the StreetAccount consensus expectation of 6.4 million units. In addition, the lack of a preorder period for the 5s likely countered some of the tailwinds from the additional launch countries this year. Overall, we believe the first weekend sales figure was a significant positive surprise for the Apple story." Raises price target to $560 from $530. Rating: Buy.

Peter Misek, Jefferies: Sell-Through vs. Sell-In Clarification on Weekend iPhone Sales. " We wanted to clarify a key way this past weekend varied from prior iPhone launches: sell-through did not match sell-in. Generally new iPhones have been completely sold out during the launch weekend. This time while the 5s is sold out, the 5c is not. We est that of the 9M+ number, 4M were 5s and 5M were 5c with half of those going into inventory. While 6.5M sell-through is still solid (vs. St 6M and ~5M last year), it is not a huge amount of upside." $425. Hold.

Chris Caso, Susquehanna: When the facts change, we change our minds. "Importantly, AAPL didn't need to sacrifice margins in order to achieve this success, the current shortages provide a healthy backlog entering C4Q, and we think a China Mobile launch still lies ahead. AAPL's risk going forward is that phone demand slows after the initial launch; it's a risk we're willing to take since we would be buyers of any weakness ahead of next year's iPhone 6 cycle. Our thesis all along is that we have wanted to own AAPL for what we believed to be a stronger iPhone 6 cycle. Now that the risk of a disappointing iPhone 5s launch is greatly reduced, and the stock up only moderately since our May initiation, we can't come up with a good reason to remain on the sidelines." Raises price target to $625 from $440. Changes rating to Positive from Neutral.

William Power, Baird: Raising Estimates on Improved Gross Margin Outlook. "We are raising estimates based on better-than-expected initial iPhone 5S and 5C sales and higher margin assumptions. We believe that the 5S and 5C should be accretive to overall margins over the next twelve months, though the coming iPad refresh, a potential China Mobile deal, and emerging products could exert additional pressure." Raises price target to $525 from $450. Neutral. 

Katy Huberty, Morgan Stanley: Record first weekend sales reflects strong demand, modest inventory fill. "We estimate the breakdown of the 9M first three days' sales as: ~3M iPhone 5s sell-through (with real demand closer to 6M), ~4M iPhone 5c sell-through, and ~2M iPhone 5c non-Apple retail inventory build (representing 1-2 weeks of inventory). An impressive 2/3s of iPhone users now run iOS7 just five days post introduction, up from 45% a year ago and 20% in 2011." Price target: $540. Rating: Overweight.

Chris Whitmore, Deutsche Bank: iPhone starts strong; raising est's and PT to $575. "Initial iPhone demand is tracking stronger than we expected (and supply more robust) as shortages / stockouts occurred quickly over the weekend, but Apple still managed to sell 9M units. We believe the added distribution and new 5C form factor helped drive better than expected uptake, particularly outside the U.S. The strong initial consumer reception to the refresh gives us greater confidence in our medium-term unit outlook." Raises price target to $575 from $480. Rating: Buy.

Toni Sacconaghi, Bernstein: Apple: Blow Out First Weekend Sales -- What Do They Mean? "On balance, the stronger than expected sales for the first weekend reaffirm our belief that upside exists for Apple's FY Q4 (Sept) and FY Q1 (December) quarters, consistent with Apple's statement that revenues and gross margins will be at the high-end of its guidance for the September quarter. In fact, we believe that Apple's statement of "near the high-end" could imply above the high-end of Apple's guidance ranges. Our analysis indicates that first weekend launch sales as a percent of current quarter (i.e. September) and next quarter (i.e. December) consensus estimates are the highest in launch history. " $600. Outperform. 

Amit Daryanani, RBC: Strong Weekend Sales for 5s and 5c. "AAPL reported that it sold over 9M units of iPhone 5s/5c during the first weekend, well ahead of expectations of ~6M units. Furthermore, AAPL now expects both revenues and gross-margins to come in at the high-end of prior guidance. We believe these numbers demonstrate AAPL's commitment and success of focusing on profitability vs. market share." Raises price target to $550 from $525. Outperform. 

Walter Piecyk, BTIG: Raising Estimates on Apple after Strong First Weekend"Six years after the launch of the first iPhone, Apple's first weekend sales figures are still primarily a function of how many iPhones it can make rather than how much demand exists in the market.  Once again, stores were emptied and online order delivery dates have been pushed out weeks.  The result was an impressive 9 million phones sold in the first weekend, an incredible manufacturing feat and something in which the company was finally able to "double down on secrecy." $540. Buy. 

Steven Milunovich, UBS: Strong 9mn Sold First Three Days. "Recent interviews with management elucidate the strategy. It is clear that management did not intend to address the lower end of the market and thinks that demand will be fine if Apple continues to make the best products with the best user experience. Apple is not in the "junk business," according to Tim Cook. Greater segmentation of the high end makes sense and helps near-term sales. The risk is Apple is not protecting its flank from Android—a $300 Android phone in a year or two will not be junk. Still, we give Apple the benefit of the doubt given the history of 'better over cheaper' strategies being successful (see our recent strategy series on Apple)." $520. Neutral. 

Brian Marshall, ISI: Looks like People are Loading up on Apples again. "With recent investor discussion often focused on the perception of diminished relevance of the iPhone, AAPL provided a powerful reminder of the strength of AAPL's iPhone franchise this weekend and the "stickiness" of its iOS/iCloud/iTunes/App Store ecosystem... In addition, 200mil+ users have upgraded to iOS7 in the first five days of its release (vs. 100mil+ who upgraded to iOS6 and 25mil+ who upgraded to iOS5 in the first five days of their respective releases). We believe many new features in iOS7 (e.g., iTunes radio, enhanced Siri/iCloud, new UI, etc.) will help AAPL retain ecosystem loyalty. Personally, we found iOS7 to be much faster on our iPhone 5 and enjoy the refreshed look/feel. $600 Strong buy. 

Gene Munster, Piper Jaffray: Breaking Down The 9 Million Units. We believe that based on the 9 million number and our observations of weekend sales, the mix may have been around 4 million 5S units and 1.5 million 5C units sold-through (3.5 million sell-in). In our 5-6 million unit sell-through estimate, we had assumed 2.5 million units of the 5S and 3.5 million units of the 5C. The channel fill we are assuming from the 5C was not in our expectations. In terms of 5C channel fill, we note that currently the iPhone 5C is available on the online Apple Store with a 24 hour lead time. We believe this implies that the company has near-full channel inventory of the 5C. Based on the 11 million total iPhones available in channel inventory as of the June quarter, we believe this implies that 5C could be 3-4 million units." $640. Overweight.

Brian While, Cantor Fitzgerald: Apple Defies the Skeptics with a 9 Million New iPhone 5S and 5C Weekend Print. "Given that the iPhone 5S was not available for pre-order this year but the iPhone 5C became available for pre-order on September 13, we believe the strength of this weekend's sales benefited from much stronger than expected demand for the iPhone 5C. In our view, the criticism of the iPhone 5C as being too expensive versus expectations and thus demand would be muted were proven wrong with today's strong weekend sales that required strong demand for the iPhone 5C because the iPhone 5S had limited availability." $777. Buy.  

Stuart Jeffrey, Nomura: Strong 5c/s Launch But Still No Growth. "While numbers are expected to come in at the high end of the guidance range, it is worth noting that year-on-year growth remains weak, for example:

  • 3% yoy revenue growth if revenues hit $37bn
  • 5% yoy gross profit decline if revenues are $37bn and gross margin is 37%

So while results look promising, they do not take away from the fact that Apple is still struggling to drive growth, which likely limits scope for multiple expansion."  $480. Neutral.

Trip Chowdhry, Global Equities Research: Sold 9 million iPhones. "We are not surprised... below is what we have been saying for almost 2 weeks. 'new iPhones will be massively successful... and this is just a start....' " $650. Overweight.

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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