Apple iPhone Sales to Grow 10% Next Fiscal Year: Analyst Luria

Published: Sep 08, 2024 Duration: 00:04:41 Category: News & Politics

Tags : Apple ai IPhone 16 iphone Artificial Intelligence Alix Steel Romaine Bostick wireless smartphone smartphones Gil Luria

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Joining us right now to help kick us off to the close is Gil Luria, senior software analyst at D.A. Davidson. And we've seen the phones. We knew they were coming. We knew they weren't going to include the features immediately. Do you think that's going to hamstring the potential upgrade cycle on the hardware devices? I think it spreads the upgrade cycle over more of a 12 to 18 month period where maybe coming out of a worldwide developer conference when we saw these features, we thought they'd all be in the iPhone 16 at launch. We thought iPhone 16 itself right away over the holidays in the fourth calendar quarter would provide the big upgrade cycle. It's becoming increasingly clear that they're going to layer in the Apple intelligence features, which means an upgrade cycle that would spread over 12 to 18 months. That doesn't change the fact that this is the biggest upgrade cycle since iPhone 12 and stock wise. Let's not forget the last time the stock worked was after iPhone 12. So we've gotten 15% outperformance out of the stock since worldwide developer conference. Taking a little bit of a step back today as we wrap our heads around how long it's going to take to get this upgrade cycle going. But just to kind of play devil's advocate here, I mean, this is a big upgrade cycle, but part of that is because that cycle got longer. A lot of people looked at their phones, they looked at iPhone 15 or 14 or 13 and said, I don't really need to upgrade. I can stick with my 12 or 11 or whatever or a few. In the case of, you know, my parents, you know, like the iPhone, you know, to someone, yeah, at least they have one guilt. But I mean, it gets to this idea here that what's sort of the sense of urgency that I guess used to be sort of omnipresent around these Apple product launches events. Have you lost that? We'll get this sense of urgency as these features come out. So first of all, the one push camera, the one press camera will be a relatively innovative feature in the context of the last four years. But it really is the Apple intelligence features, the the summarization, the prioritization, the organizing memories, the allowing Siri to take action. Those are new things that as they start working into our regular workflows, people will notice them and have that FOMO when they see their their friends and family using these features to do things that were previously not possible. Mm hmm. This is one of the nice things about what Apple does is it takes technology that's revolutionary and it incorporated into what we already do. Some of these features functionality already available around tools like charge. But you have to take them outside of what you're doing to get the benefit. Mm hmm. If the automatic writing, the image generation, the summarization, the prioritization happens within your experience, you'll notice it, you'll be delighted. And again, you'll start proliferating those thoughts and excitement to your friends and family, which is what gets the upgrade going. Okay, Gil, so how do you calculate, though, a spread out supercycle into valuation? So it's not spread out into more than 12 or 18 months, meaning our forecast is for iPhone to grow 10% in the next fiscal year. That's still the forecast, whether it's a little later in the year, a little earlier in the year. That would be the biggest upgrade cycle since iPhone 12. And expectations are for a much smaller four, maybe a single digit, maybe even mid-single digit growth. So we think that in the next fiscal year, there will be 10% growth in iPhone, which let's not forget is half of Apple's sales more than that and profits and pulls the other categories. It pulls the wearables at full services. So that's the acceleration Apple needs to its growth. And profitability is even if it takes a full year to do those upgrades as opposed to being more concentrated on the front end. And then how does and China play into it? I mean, there's so many issues. There are these kind of upgrades and the potential enough to get Chinese consumers into buy or can this be this 10% growth in sales without a strong China? China is going to continue to be a wild card. And in China, this functionality is more table stakes. The native competitors there are going to introduce similar functionality and there's less of a of a brand pull in China for Apple than there is in other parts of the world. So China will continue to be their toughest market, their most challenging market. They have to make up for it in other markets, specifically maybe in India.

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