iPhone Sales Drastically Surpass Q4 Consensus; Apple Reaches 10m Goal 33 comments
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This article was co-authored by Seeking Alpha contributor Turley Muller.
Based on the tremendous joint efforts by members at Mac Observer's AFB and Investor Village's AAPL Sanity Board member howlongtoretire (aka HLTR) to track IMEI iPhone numbers, we have determined that Apple has drastically surpassed analysts' Q4 iPhone sales estimates, and that Apple has reached its goal of selling 10 million iPhones in 2008. The consensus estimates for iPhone sales figures for Apple's Q4 (calendar Q3) were calling for approximately 4 million units. It now appears that Apple has sold at least 7 to 7.5 million iPhones in Q4—that's nearly 80% above consensus. Apple has far surpassed even Gene Munster's bullish estimates of 5 million iPhone sales in Q4 according to the data.
At MacWorld 2007, when Apple was trading at the same price it is today, Steve Jobs and Apple set a bold goal of selling 10 million iPhones in 2008. Despite Apple's consistent reassurances of meeting its goal, bearish analysts repeatedly raised irrational concerns about whether Apple could reach such lofty sales figures. In January, Bernstein Research analyst Toni Sacconaghi, an analyst who rarely comments on Apple, started the "missing iPhones controversy" which led a herd of naive analysts to reduce their iPhone sales estimates to numbers that fell well below Apple's 10 million iPhone goal for 2008. Sacconaghi forecasted that Apple would only sell 7.9 million iPhones in the period. This obviously put considerable pricing pressure on shares of Apple in February.
Kathryn Huberty of Morgan Stanley, arguably one of the worst analysts covering Apple, estimated that Apple would only sell 9.3 million iPhones for the year. Apple now appears to be on track to sell nearly double that number. Yet, Huberty and Sacconaghi aren't the only ones. Keith Bachman of BMO Capital also jumped on the bashing Apple bandwagon in February when he estimated that Apple would only sell 8.5 million iPhones in 2008. Scott Craig of Bank of America also maintained bearish iPhone estimates in February with an 8 million iPhone sales target. Several other analysts followed suit and were obviously dead wrong. One would think these analysts would have learned from their mistakes, yet to no avail we see similar behavior from many of these very same analysts today.
IMEI Number Tracking by Mac Observer's AFB
An IMEI number or an International Mobile Equipment Identity number is a unique 15 digit code assigned to each individual iPhone found on the back of the box in which an iPhone is packaged. Within this 15 digit code are two 6-digit numerical sequences crucial to determining the number of iPhones being produced. One 6 digit number, known as the TAC, or Type Allocation Code, signifies a particular build or set of iPhones being manufactured. The second 6 digit number is unique to each individual iPhone produced in that particular series—so that 1 million iPhones can be registered to a specific TAC. In other words, one six digit code, known as the TAC, signifies a set of iPhones being produced whereas the other six digit code signifies each individual iPhone within the TAC set.
Members at the Apple Finance Board at Mac Observer have been collecting IMEI numbers from new 3G iPhones sold during the period, and have been maintaining a spreadsheet of iPhone IMEI data points along with the purchase date, model, and production week. By early September, Apple was on its 8th TAC, meaning that 8 million 3G iPhones had already been manufactured. The actual number of handsets sold versus manufactured depends on a variety of factors including the amount of inventory Apple carries in its retail chain, defects that were destroyed, defects that were sold and then exchanged, display models etc.
However, the latest IMEI data point collected by AFB was 9,190,680—an 8GB Black iPhone recorded as manufactured on September 29 and sold on October 5. This suggests that even if a whopping 1.5 million iPhones of the total IMEI registered devices are unsold as of today, an unlikely assumption, it would still put 3G iPhone sales at 7.6 million units and 2008 iPhone sales at over 10 million units. Coming into the quarter, Apple had already sold 2.42 million iPhones. Thus, 7.6 million 3G iPhones sold puts Apple above 10 million units for the year.
Net Applications OS Market Share
The Net App OS share measurements based on web usage data lends further support to the IMEI tracking conclusions. In the weeks leading up to the 3G launch, iPhone OS share was rather consistent hovering at 16 bps. During this period, the population of iPhones remained static at 6 million units because inventory dried up weeks before. The share readings began to rise sharply subsequent to the 3G introduction. Due to the volatility and noise present in the data over the quarter, it's not possible to make granular assessments. However, for the last few weeks of the September quarter, iPhone OS was averaging 34 bps. This suggests iPhone units increased by 6.75M. A small portion of legacy iPhones were replaced by 3G models resulting in those sales having no effect on OS market share readings. Sales into the channel are not represented in the Net Applications measurement since the device is yet to reach the end-consumer. This data together with the IMEI Number Tracking by the AFB highly suggests that Apple more than likely sold at least 7 million iPhones in Q4 and that Apple has surpassed its 10 million iPhone target.
Disclosure: Both Andy Zaky and Turley Muller are Long Apple.
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This article has 33 comments:
I buy what you two guys say.
Thanks
The stock will probably go CRAZY and the analysts will go WILD!
I bet we see $75 per share today!
BIZARRO WORLD.
Veronica
actually don't buy the stock period, it's going to $60 regardless of how many phones they sold.
It's going to happen all over again. I shall double my investment in Apple this time round for sure.
I think the initial Iphone craze within the investing community has died down, the problem being how Apple accounts for that revenue. We hear all these great and glorious figures but they aren't reflect in some basic metrics like the PE ratio. There's a lot of people out there that won't touch a stock like Apple just because of it's PE and until we get to 8/8 quarters into the earnings, I think it's going to hurt the stock performance because people just looking at trailing and forward PE are going to be dissatisfied.
So, the iPhone pipeline inventory, if iPhone is representative of Apple overall is not much. Hence, by using the tracking numbers as a proxy for what is sold and not just manufactured, is probably highly accurate.
Given Apple's fantastic performance in supply chain, marketing, retailing, and design, and also given its nearly unique position as one American company who can steal some economic good news back for the U.S., I just can't see how some people take such glee in bashing the stock price. You could say once that as GM goes, so goes America, but now it's companies more like Apple and Google. I don't understand why this negative behavior is so seductive to some people, but it's not good for the U.S.
i read that 38% of people who will purchase a smartphone within 6 months, want an iphone. this is astounding! the pc world is so terrified that they've resorted to false rumors, even through cnn!
no advertising will touch apple because people are starting to experience the products and the products are so obivously better than others.
the economy is bad...but that might actually help iphone sales because it's reassuring to people to be in touch with 'their stuff' on the web and with their network of people anywhere they go and Apple has promoted the idea of a personal 'computer' in your pocket with an aura of something fun while being productive. the whole aura is just more positive than the others.
Apple will make $ for us again. disclosure: long appl
Wanna bet?
"It now appears that Apple has sold at least 7 to 7.5 million iPhones in Q4..."
Wanna bet?
Kathryn Huberty... estimated that Apple would only sell 9.3 million iPhones for the year. Apple now appears to be on track to sell nearly double that number."
Wanna bet?
"By early September, Apple was on its 8th TAC, meaning that 8 million 3G iPhones had already been manufactured."
First off, some simple math. Assuming that being "on" the 8th million means that the first seven million numbers were assigned, this would mean seven million -- not eight million -- had been manufactured. But more importantly - are you SURE that's what this means?
Your conclusions are not sufficiently supported, specifically in that there is no discussion of the data quality leading to them. Perhaps you have information about the reliability of the IMEI data that you haven't shared. Do you know how these numbers are allocated? Do you know how many Apple has already been assigned? Do you know the rules covering the assignment of these numbers to phones, once they are assigned to a manufacturer? If there is any flexibility in how they are used once assigned to the manufacturer, do you have insight into Apple's choices in this regard? In other words, how do you KNOW that a million IMEI's means a million phones? Further, how do you KNOW that the (very few) numbers reported in the spreadsheet are accurate?
Without a solid understanding of the data quality, the assessment means nothing.
Disclosure: Long Apple.
What I hope is they they bring out a recession model that hits some lower price points. Perhaps even a PA semi CPU model that is very cheap (but does NOT run Windoze). It would sell very very well, but the high end would still want Intel, so there would not be too much cannibalization of sales.
Kind of like the MacBook Pro. It's really not much more computer than the MacBook (which has a killer CPU, etc... just like the pro) but we pay for the pro version to get the hot graphics chips, and the light up keyboard, larger screen, etc...
Trailing PE is based on future guessed predictions. Predictions can (and will be) revised to lower values and so the new trailing PE will follow.
People were telling the same thing for other stocks. See nvda and his trailing PE. It's halfed now.
+ AAPL has about $24 per share in cash.
+ It's currently trading at $89, and it has earnings of $5.11 per share.
+ Subtracting the cash out of the share price gives you $65 per share on the business.
+ Divide in the earnings and you get a P/E of 12.7.
For a company that is growing earnings at 30% plus, this represents a tremendous value...
You don't really have any idea what "trailing PE" means, do you?
Well thanks for trying Zaky/Muller, and I hope the data is accurate!
Witness the iPhone competition - it's still far behind over a year after the 1G was introduced.
Add to that a still pretty large untapped international potential for iPhones and Macs. Macs are at 8% in the U.S. and at 3% in Europe and Asia. How much is an almost guaranteed growth from 3% to 8% in EU and Asia worth?
Disclosure: I am getting all the AAPL I can at these discounted prices.
1. Apple should just stop giving guidance and screw the analysts.
2. Implement a $1 a share dividend which would cost $900 million a year.
3. Announce that Jonathan Ives and Oppenheimer will take over as co-ceos or that they will run the company (succession plan).
4. Announce a buy back of stock (maybe 4-5 billion) They announce it like most companies but doubt they ever buy that much stock.
5. Buy Akami to better control cloud computing and music and tv downloads.
At a meeting for new products
1. Drop the 8gb iphone and make a 16 and 32 gb model at $199 and $299 to put the heat on Rimm.
2. Push the mobile me service and bundle it with the iphone at a discount. More pressure on Rimm. They should advertise the back to my Mac service which is awesome.
3. Add a dvd player to Apple TV.
4. Bring out an iTablet and get Fedex on board to use them.
5. Allow dvd loading like cd loading of music in itunes. Then your apple tv would be super useful.
6. Add multitouch screens to the laptops.
"I have, I was thinking to something else while typing and swapped the meaning of the two words (trailing/forward). Thank you for your concern. Now rest."
I find that when being an arrogant ass, it's best to make sure not to say something SUPREMELY STUPID.
been following your articles for sometime. you do a great job on fundamental analysis. what books do you recommend for an aspiring investor?