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.
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.