iPhone 16 Sales Muted Initially, But Apple Intelligence Expected to Boost Demand

Upcoming AI features to fuel stronger iPhone 16 demand: BofA By Investing.com

Investing.com -- Apple's iPhone 16 Pro and Pro Max models exhibit extended shipping times, with the Pro at an average of 13 days and the Pro Max at 20 days globally, as of October 2, which is slightly less than previous years, Bank of America (NYSE:BAC) said in a Wednesday note. BofA suggests that the initial demand might be subdued due to the absence of Apple Intelligence features at launch but expects a demand surge once these AI features become available, particularly in the U.S. As such, the bank's analysts maintain a Buy rating on Apple Inc (NASDAQ:AAPL) stock, citing expectations of a "multiyear iPhone upgrade cycle, tailwind to gross margins, and strong cash flows." In comparison, the standard iPhone 16 and the iPhone 16 Plus are more readily available across the globe. The iPhone 16 shows a global ship time of 5 days, while the Plus model is at 3 days, with the latter being in stock for most configurations across various regions. This indicates a higher availability for the non-Pro models of the iPhone 16 series. In China, the iPhone 16 Pro and Pro Max models have shorter lead times than in other regions, standing at 10 days and 2-3 weeks, respectively. In contrast, in Japan, the base iPhone 16 model has a longer lead time of 7-10 days, compared to 1-3 days in other international markets. In the U.S., carrier lead times for the iPhone 16 series are shorter than those on Apple's website, "which could suggest more supply at carriers," analysts noted. Last week, a fire at Tata's iPhone component plant in India caused a production halt. The facility provides back panels and other components for the iPhone 15 and 14 models to Foxconn (SS:601138) India and Tata's own assembly operations. However, BofA does not foresee any immediate impact on iPhone supply, noting that Apple's suppliers usually maintain adequate component inventories for assembly. "Apple can also mitigate the impact by supplying the components from other regions until the Tata plant resumes production," analysts explained.

Early iPhone 16 Sales Are 'Muted' But That Is 'Likely Due To The Unavailability Of AI Capabilities,' Analysts Believe Apple Intelligence May Generate Sales Momentum

Apple was estimated to have recorded an unsatisfactory number of pre-orders this year for the iPhone 16 series, with the 'Pro' models reportedly garnering 12.7 percent fewer pre-sales compared to the iPhone 15 Pro and iPhone 15 Pro Max from 2023. Only the iPhone 16 Plus managed to offset the seemingly low demand by accumulating 48 percent higher pre-orders for the iPhone 15 Plus. There can be various reasons why customers are simply not interested in upgrading to the newer models. One of them is the lack of a design change, and while Apple has addressed various concerns with the latest lineup that customers voiced about the iPhone 15 family, it appears that internal hardware improvements are insufficient to warrant an upgrade. However, according to analysts, another reason is the unavailability of AI features, and when Apple Intelligence officially drops later this year, things could change massively for the technology giant. Investors' notes from JP Morgan analysts that were spotted by AppleInsider state that there is 'more muted momentum' in early orders, particularly for the iPhone 16 Pro and iPhone 16 Pro Max. In total, the California-based titan was previously reported to have prepared 17 million units for pre-order, but the lack of positive reception could be 'likely due to the unavailability of AI capabilities.' Even right now, the official iPhone 16 product pages have 'Apple Intelligence' plastered all over to market the company's slew of generative AI features, but there is nothing to show for it. However, JP Morgan analysts state that Apple Intelligence was not even in the top five reasons people wanted to upgrade, coming in sixth place instead. Another disadvantage here is that Apple Intelligence will initially be available in English only, making it practically useless for consumers who have purchased the iPhone 16 overseas but do not speak English as their first or second language. With time, the company will introduce supported languages, which may positively impact sales. As of right now, analysts estimate that Apple will ship 76 million iPhones in the fourth quarter of 2024, and is expected to hit 148 million shipments over the next four quarters. We have highlighted a few reasons why an iPhone 16 upgrade should be skipped for the iPhone 17 arriving in 2025, but those who have yet to transition to a newer model will find plenty of reasons to be happy if they pick one of Apple's models this year.

Apple Intelligence will drive iPhone 16 sales but isn't a major factor yet

Investment bank JP Morgan analysts say that Apple Intelligence is not yet drawing iPhone users to upgrade, and demand for iPhone 16 Pro models is weaker than it was with the iPhone 15 Pro range. In April 2024, JP Morgan dropped its Apple stock price to $210 because it believed that Apple Intelligence would drive iPhone 17 sales rather than iPhone 16 ones. Then in May 2024 it raised the stock price to $245 specifically on the strength of Apple's announcement of Apple Intelligence. Now having conducted a user survey and monitored sales of the iPhone 16 range, the company is taking up a position in the middle. JP Morgan now believes that Apple Intelligence will drive up sales of the iPhone 16 range -- but not yet. In pair of notes to investors seen by AppleInsider, JP Morgan says there is "more muted momentum" in early orders for the iPhone 16 Pro models. But this is "likely due to the unavailability of AI capabilities," which users want to see before they buy. At present, JP Morgan found that Apple Intelligence wasn't even in the top five reasons people are upgrading. It comes in sixth, but ahead of it are factors such as 5G connectivity and overall speed of the phone. There is also the issue that Apple Intelligence will initially only be available in US English. The analysts predict that consumer appetite for the Apple Intelligence models will grow as more countries are supported. This is based both on the rationale that a wider audience reach will help, but also on the analysts' findings about demand. The company's survey showed that where 63% of people surveyed in 2023 intended to buy a new iPhone 15, now 68% expect to buy from the iPhone 16 range. The survey showed that in particular, demand from consumers in the US and China is higher. There is also a higher appetite for Android users to switch to iPhone, with 2023 seeing 50% wanting to move, and in 2024 it's 61%. Those switchers from Android reportedly prefer the higher-end models. That's the opposite of the current trend in regular iPhone users. Overall, JP Morgan now predicts Apple will sell 76 million iPhones in Q4, 2024. It will reach 148 million over the next four quarters. The investment bank's analysts also describe the response to the Apple Watch Series 10 as "muted," but then says that its survey shows much greater interest than for the Apple Watch Series 9. In 2023, a survey said 38% of consumers looking for a smart watch were intending to buy an Apple Watch, and now it's 54%. As a consequence of the current sales and its prediction of how Apple Intelligence will grow, JP Morgan is maintaining its Apple stock price of $265.

Apple Analyst Signals 'Slower Start To The AI Cycle' As iPhone 16 Demand Softens - Apple (NASDAQ:AAPL)

Despite a slow start to the iPhone 16 Series, Chatterjee maintains a $265 price target, citing a robust AI upgrade cycle. As the curtain rises on the iPhone 16 Series, Apple enthusiasts are buzzing with anticipation. However, JPMorgan analyst Samik Chatterjee suggests that while the hype is palpable, the initial momentum for high-end models appears muted compared to past launches. iPhone 16: 'Launch Lacking Early Momentum' Chatterjee highlights that the rollout has faced a slight hiccup, primarily due to the unavailability of AI capabilities, which seems to be causing a pause among potential buyers. In Chatterjee's latest insights, he points out, "Early signs are indicating a robust product cycle; albeit, with the launch lacking early momentum for the high-end models." This may prompt consumers to hold off on their purchases until they can fully grasp the AI value proposition. As a result, JPMorgan has adjusted its near-term iPhone unit forecast, now estimating about 126 million iPhones sold in the second half of 2024, down from 130 million previously. Read Also: Apple's iPhone 16 Series Leads Growth, But High-End Model Preference Declines: Analyst Medium-Term Prospects Are Bullish, Says Apple Analyst Despite these short-term adjustments, Chatterjee maintains a bullish outlook on the medium-term prospects for Apple. He asserts, "We continue to forecast aggregate volumes for the 16 Series over the next four quarters to track ahead of both the 15 and 14 Series," indicating a confidence that consumer appetite for AI-integrated features will ramp up once they become widely available. Long-Term Upside Is Evident The analyst's enthusiasm for the long-term potential is underpinned by expectations of a robust AI upgrade cycle. "We see upside in several aspects of the business... transformation of the company to Services, growth in the installed base, technology leadership, and optionality around capital deployment," he said With this optimism, JPMorgan reiterates its price target for Apple at $265 by December 2025. Investors might feel a pinch in the near term, as the excitement around AI upgrades may not translate into immediate sales. But, as Chatterjee aptly puts it, "The slower start to the AI cycle than originally anticipated" is just a temporary roadblock to growth. The real treasure, he believes, lies just beyond the horizon as Apple continues to evolve and innovate. While the iPhone 16 Series may not be breaking records just yet, the groundwork for a significant AI upgrade cycle is being laid, promising a future where Apple once again dazzles its fans and investors alike. Read Next: Cramer Says 'Hot Money' Flowing From Nvidia, Apple Into China, Focus On Alibaba 'If You Must' Photo: Shutterstock Market News and Data brought to you by Benzinga APIs