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“Things don’t have to change the world to be important,” Apple Inc co-founder Steve Jobs said in an interview in 1996. His words rang true, two decades later, as sales of the iPhone 7 and 7 Plus – similar in design to their predecessor – surpassed expectations to reinstate Apple as the world’s biggest smartphone seller after a five-year gap.
This has only built expectations, however, that the 10th-anniversary iPhone will need to offer revolutionary new features if it is to trigger a substantial uptick in sales. “This is really the last (quarter) that anybody is going to care about iPhone until the launch this fall,” Cowen & Co analysts wrote in a note. “It can be said that iPhone 7/7+ ‘did its job’ as a bridge to get to the supercycle in 2017.”
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Apple sold 78.29 million iPhones in its fiscal first quarter ended December 31, up from 74.78 million a year earlier. Analysts on average had expected sales of 77.42 million. The sales reflected the first full quarter of iPhone 7 sales and come at a time when global demand for smartphones is slowing and cheaper Android alternatives are flooding the market. Apple may also have benefited from Samsung’s much-publicized recall of its fire-prone Galaxy Note 7.
Apple’s strong sales set the stage for the 10th-anniversary iPhone, which analysts say is expected to feature better touchscreen display, wireless charging and a shift to a higher-resolution OLED display.
The company typically launches new iPhones in September. A big jump in sales usually follows in the holiday quarter, before demand tapers over the next few quarters as customers hold back in anticipation of the next launch.
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Existing iPhone users tend to upgrade their devices when the new model has significant design changes. Apple last saw a significant uptick in sales with the introduction of iPhone 6 in 2015. “We see pent-up demand heading into a significant form factor change that is likely to accelerate iPhone unit growth,” Morgan Stanley analysts wrote in a note.
At least twelve brokerages raised their price targets on Apple. Stifel Nicolaus & Co and RBC Capital Markets – the most bullish brokerages – raised their price targets by $15. No brokerage changed their rating on the stock.
Of the 48 analysts covering Apple’s stock, 39 have a “buy” rating or higher. Eight have a “hold” rating and one a “sell”. Their median price target is $139. To Tuesday’s close of $121.35, Apple’s shares had risen nearly 25 percent in the past 12 months.
