Apple's (NASDAQ:AAPL) new iPhone 8 and iPhone 8 Plus smartphones hit store shelves on Sept. 22, as expected. They didn't create the kind of splash associated with previous iPhone launches, though.
The new iPhone models are in stock at many retail outlets -- a rarity for this time of year -- and the backlog for online orders is very short. Not surprisingly, many Apple investors and analysts are very worried by this situation. However, with the highly anticipated iPhone X release coming up in about a month, there's no reason for investors to panic about slow iPhone 8 sales.
Subpar sales for the latest iPhones
Apple has not released any sales estimates for the iPhone 8 and iPhone 8 Plus. As a result, investors are mainly relying on third-party sources to gauge sales. The available data suggest that the new iPhones got off to a lackluster start.
A Localytics report covering the first weekend of sales found that adoption of the new iPhones was the slowest of any iPhone release since 2013. Nearly a week after going on sale, the new models still accounted for roughly 1% of total iPhone usage (on a combined basis), suggesting that fewer than 10 million had been activated. For comparison, Apple sold more than 10 million iPhones on the weekend it released the iPhone 6 and iPhone 6 Plus -- without any sales in China.
Tim Cook stated on the first day of sales that Apple had good supply of the iPhone 8 and iPhone 8 Plus, although they had sold out at some stores. This suggests that slow adoption of the new models is a demand issue, rather than the result of a supply shortage.
This is a unique year for the iPhone
While there is a natural urge to compare last week's sales to previous iPhone launches, 2017 is a unique year due to the impending arrival of the iPhone X. The iPhone 8 and iPhone 8 Plus offer solid (but not extraordinary) improvements relative to the iPhone 7 and iPhone 7 Plus. The new models feature a new design; upgraded cameras, displays, and processors; wireless charging; and support for augmented reality.
By contrast, Apple describes the new iPhone X -- set to hit stores in early November -- as "the future of the smartphone." As one analyst put it, "The iPhone 8 family were obsolete in the eyes of the geekerati two minutes after they were launched by the steamroller love-in of the iPhone X."
The iPhone X will have a hefty starting price of $999. However, past experience shows that iPhone users are not very price sensitive, on average. Thus, it wouldn't be surprising if many of the most loyal iPhone fans are waiting for the cutting-edge iPhone X.
On the flip side, the iPhone 8's starting price of $699 is higher than the $649 price point that Apple had been using previously for new iPhones. Meanwhile, Apple has dropped the price of the 32GB iPhone 7 to $549. Thus, price-sensitive customers have more reason than ever to opt for older models. The iPhone 8 and iPhone 8 Plus could easily find themselves squeezed in the middle.
It will take time to gauge how Apple's doing
There's no way to know in advance what proportion of consumers will want the iPhone X versus the iPhone 8 or iPhone 8 Plus versus an older discounted model. The uniqueness of the fall 2017 iPhone lineup means that previous years' sales trends don't necessarily provide a meaningful baseline for investors.
Weak iPhone 8 sales aren't a problem for Apple if they reflect a consumer preference for the pricier iPhone X model. By contrast, weak sales caused by a slowdown in the replacement rate or market share losses would be concerning.
For now, investors should just be patient. It will probably become clear within a few months whether the iPhone X is a smash hit despite its lofty price tag.
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Adam Levine-Weinberg owns shares of Apple and is long January 2018 $90 calls on Apple, short January 2018 $140 calls on Apple, and short February 2018 $160 calls on Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.