Apple Inc (NASDAQ:AAPL) shares edged higher on Wednesday ahead of Friday's official launch of the iPhone 11, unveiled at the tech giant’s annual Fall product event at its headquarters in Cupertino, California last week, with analysts at Wedbush expecting that China could be the star of the show.
In a note to clients reiterating an Outperform rating and $245 price target on Apple shares, Wedbush’s analysts said: “We are seeing delivery times extend for iPhone 11 pre-orders across a range of colors and models this week, with our expectations now that iPhone launch units could exceed 75 million (original Street expectations were ~70 million) given underlying demand especially in China.”
READ: Apple fall event brings camera-boosted iPhone 11, updated iPad and watch, TV streaming service launch
They added: “The base model iPhone 11 currently we estimate is seeing pre-order activity in the all-important China region that is ‘roughly double’ from a year ago with XR as it appears the lower price points, dual camera functionality, and added colors is hitting the sweet spot for consumers that have been waiting to upgrade.”
To put numbers around this, the analysts continued, they estimate that 60 million to 70 million iPhones in China are currently in the "window of an upgrade opportunity".
“Especially with lower priced competition across the board, the price cut this time around was a smart strategy for Cupertino that is already paying dividends with many Chinese consumers looking at iPhone 11 as the right phone/price points/specs to upgrade which is key as Huawei and others look to capitalize on the current environment and convert Apple consumers to domestic Chinese smartphones in light of trade tensions,” the Wedbush analysts continued.
They said with the new phones hitting the shelves around the world Friday, lines at the flagship stores are expected to exceed the last two releases as roughly one third of the 900 million iPhone users globally have not upgraded their smartphones in more than 3 years and the analysts are modeling that many will upgrade to iPhone 11/iPhone 11 Pro this time around.
The Wedbush analysts said they now estimate that iPhone units could exceed 185 million for full-year 2020 “based on the initial demand trajectory out of the gates and show modest YoY growth which is major fuel in the tank as Apple looks to further monetize these customers through services”, such as streaming which launches on November 1.
They concluded: “While services represents the next leg of growth, iPhones continue to be the hearts and lungs of Cupertino with the combination of this year's iPhone 11/iPhone 11 Pro launch and next year's 5G smartphones representing the 1-2 punch to cement Apple's next chapter of growth.”
In afternoon trade on Nasdaq, Apple shares were 0.3% higher at $221.40.
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