Apple IPhone SE On Track To Hit Sales Of 9 Million Units This Year

Apple Inc.s iPhone SE On Track To Hit Sales Of 9 Million Units This Year

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The launch of the iPhone SE was met with some fanfare among the media and analysts alike. However, the mid-end of the smartphone market is fairly congested with competition, and weakening revenue comps in China and a difficult path to market adoption in India raises the stakes for Apple Inc. (NSDQ:AAPL) to execute across the lower pricing segments. The device itself seems to have adequate features for those wanting an entry-level high-end experience. However, it’s also become increasingly difficult for Apple to sustain y/y unit comp growth with the entire smartphone market contracting in Q1’16.

iPhone SE Estimate

Determining whether the Apple iPhone SE was a success or failure is somewhat hard to define. I believe analysts were anticipating roughly 10 million in SE shipments by the end of the current fiscal year. To determine whether Apple is on track to reach consensus figures, I conducted a quick study, based on which I will provide a FY’16 forecast for the product category alone. Furthermore, the iPhone SE has a lower ASP (average selling price) when compared to the remainder of the iPhone product segment, so it’s worth determining the extent to which it may affect consolidated gross margin. Of course, understanding the margin/product mix isn’t an exact science, but it gives us a starting point for determining whether Apple’s initial entry into the $400 price segment offers meaningful opportunities in the immediate near term.

According to Fiksu market tracker, the iPhone SE composed roughly 0.8% of the total iPhone usage mix as of May 30, 2016. Given the large installed base of global iOS users, the figures are somewhat supportive of modest success in the mid-end, which is a much larger market than the high-end smartphone market. While aggregated growth has slowed, I believe the step-down in pricing gives investors an opportunity to capitalize on the saturation of handsets across lower pricing tiers. I also don’t anticipate Apple to introduce products at lower price points. It’s also not clear whether the special edition will receive an annual or biannual upgrade cadence. However, I imagine there to be a lot of incentive for Apple to maintain a product category below $500, especially if it wants to penetrate a higher percentage of the emerging market consumer base.

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Disclosure: I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours. I am not an ...

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