There’s been a lot of chatter about the iPhone supply chain lately, and the buzz isn’t likely to let up for a few months. But come the spring, all of that might not matter, as Apple will have a chance to show just how profitable its flagship iPhone X is.
Barclays analyst Mark Moskowitz predicts that discussion of production delays for the new $999 iPhone will trail off by the spring quarter of next year, “setting the stage” for the company to sell a greater mix of its more expensive phones and boost its profits in the process.
Moskowitz significantly increased his earnings and revenue estimates for the coming calendar year, which are a bit above the average forecast of all analysts tracked by FactSet. He sees earnings per share of $11.58 and revenue of $270 billion for the 2018 calendar year. The trade-off, of course, is a less exciting holiday quarter this year, while Apple continues to work out its production issues.
Those expecting the iPhone X to have a similar effect as the iPhone 6 did might be disappointed, however, according to Moskowitz. The iPhone 6 drove in a big wave of device upgrades — the so-called supercycle — but it also was thinner than its predecessor and offered a lot more screen space. The iPhone X only has 20% more viewing space than the iPhone 7, he notes, and about the same amount of screen area as the iPhone 7 Plus. It’s also a bit thicker.
The iPhone X will also be significantly more expensive than its predecessor, which wasn’t the case for the iPhone 6. The high price reflects steeper costs for materials, but it could help boost profits — if customers are willing to pay up. Moskowitz argues that while the features of the iPhone X are ”cool,” the phone’s base model will be priced at a 369% premium to others in smartphone land, which could be hard for people to justify.
Big Picture: An analyst is more optimistic about Apple’s earnings potential in 2018, but he still questions whether people will be willing to pay big money for the iPhone X.