Ahead of its release, analysts speculated that the iPhone X would drive a phone upgrade “supercycle”. For about three years, Apple stuck to the same design for its new phones, and many consumers also decided to keep their old models..
The iPhone X was announced and offered in September, with a new design for the first time since the release of the iPhone 6. Many expected that the bezel-less screen features and those face lock would lead to a big wave of improvements, but that unfortunately did not happen, according to Steven Milunovich, analyst at UBS.
“Fiscal year 2018 is probably not a supercycle but a solid year,” said in a note to clients on Monday. While iPhone sales are on the rise, it is not at the “supercycle” level that many analysts have claimed..
There are several reasons for this missing “supercycle”. Milunovich pointed out that the United States has around 320 million people, and only 48% of those people currently own an iPhone from which they can decide to upgrade. This means that only 75 million people are ready to upgrade their iPhones every year, assuming a 2 year update cycle. Milunovich hinted that Apple has hit its cap in the US market, and that it should expand its market share to sell more phones.
Many analysts have also expressed concern about the high cost and low supply of phones. The iPhone X is the most expensive phone Apple has ever released, and only a few million people have a chance to buy it when it is released, and the production problem seems to have improved a lot now. The hefty price tag might well have steered customers away from the iPhone X. The other options Apple announced in September maintain the same design as their predecessors..
Squeezing more money from their consumers is Apple's next step after selling as many devices as possible to expand its market share, Milunovich said.
"The action story should shift iPhone cycles to its rent - how does Apple monetize the installed base with additional products and services?" Said Milunovich. Apple has already worked on this, increasing revenue from its service business to 16.2% of total revenue, or $ 8.5 billion, in the last quarter. The higher price of the new iPhones also means that Apple makes more money on average on each phone it sells.
International markets are another potential target for Apple. Although the US market is saturated, Apple has plenty of growth opportunities in China and other parts of the world, according to Milunovich.
He valued a buy from the company, with a target price of $ 190, which is about 8.6% more than the company's current price of around $ 174.
This year, Apple's stock rose to 80.07%.
