Upending analyst consensus pessimism that Apple Inc. (AAPL) would underwhelm with the weekend’s simultaneous release of the iPhone 5S and 5C, the company beat sales expectations comfortably, moving 9 million units of their flagship line over the weekend. The tech giant added that they would be raising their guidance for the quarter ending Sept. 28, now expecting revenue to clock in around $37 billion.
The timing of the guidance raise is an unprecedented maneuver. Ben Reitz of Barclays said he couldn’t ever recall the company doing so, and surmised that Apple is trying to send a message. It appears that message is that the company is moving the conversation away from the 5S versus the 5C, and putting it squarely on the company’s bottom line.
Most speculation concerning the launch weekend focused not on total sales, but on the fact it would feature two iPhones aimed at markedly different demographics. The higher-end 5S continues the tradition of adding bells and whistles to the previous iPhone iteration (in this case, a fingerprint scanner, improved camera, and faster processor) and targets the typical developed market Apple customer. The lower-end 5C, a hundred dollars cheaper than the 5S, is targeted towards young adults and the emerging Chinese market.
While the 5S was expected to sell well, and did, with the gold-color option selling out same day, analysts had been bearish on the 5C, calling it too expensive for emerging markets. In a note to clients that encapsulated the general analyst sentiments on the 5C, three days prior to launch BTIG analyst Walter Piecyk wrote that the 5C fails “to adequately address the significant global growth opportunity that we believe exists with unsubsidized prepaid customers that have not yet bought a smartphone."
Now analysts consensus is that regardless of concerns over the 5C, the unit is moving. Bill White of Cantor Fitzgerald wrote that “the criticism of the iPhone 5C as being too expensive versus expectations and thus demand would be muted were proven wrong.”
Following the launch weekend, Apple chose not to address the particulars, only revealing that the iPhone 5S’ supplies were constrained at times, which in turn possibly spurred sales of the 5C. Whether those customers were in America or an emerging market, or what the market split between the two phones was, is still unclear. What is clear with the unloading of 9 million “iPhones” (model unspecified) is that sales were healthy enough to ratchet up guidance, indicating an increase of revenue that could end up totaling in the billions.
Quickly following the healthy sales announcement, RBC Capital upgraded Apple to Outperform. Lazard Capital markets raised their price target to $570. And analysts at FBN Securities raised their price to $625.00 a share. The consensus price target for the stock is now $544 a share, roughly 12 percent higher than present valuation.
Apple jumped 4.15 percent on the day to hit $486.60 a share.
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