This fall, for the first time ever, Apple (NASDAQ:AAPL) rolled out three new iPhone models at once. One of those options -- the iPhone X -- was the most expensive iPhone ever, priced at $999 for the 64 GB version and $1,149 for the 256 GB version. Furthermore, the iPhone X didn't go on sale until six weeks after the iPhone 8 and iPhone 8 Plus became available.
Apple was operating from a new playbook this fall. As a result, it was hard to predict in advance how the three phones would sell in comparison to one another.
The iPhone X has only been out for a month. However, it's already clear that it will be just as big a hit as Apple bulls expected. Indeed, Apple fans' willingness to pay top dollar for iPhones has ratcheted up dramatically this fall.
iPhone X usage surges ahead
The iPhone 8 and iPhone 8 Plus saw an initial burst of sales when they hit the market in late September, as is typical for new iPhone models. Nevertheless, it quickly became obvious that demand for these models was much lower than for prior new iPhone releases, based on usage statistics and the lack of meaningful supply constraints.
This demand pattern was not especially surprising, given that the iPhone X release was delayed to early November. What wasn't clear was whether most potential customers were holding out for the iPhone X or whether they just wanted to compare all three models and might ultimately buy the cheaper iPhone 8 or iPhone 8 Plus.
The former explanation appears to be correct, based on iPhone usage statistics from Mixpanel. The iPhone X overtook the iPhone 8 in terms of usage before Thanksgiving, and it surpassed the iPhone 8 Plus by the end of November.
There is still a lot of pent-up demand
The iPhone X is already the usage leader among the three iPhone models released this year, but it is set to continue gaining ground. Whereas the iPhone 8 and iPhone 8 Plus have been readily available for months, the iPhone X is still on backorder worldwide. This indicates that supply (rather than demand) is the primary constraint on iPhone X sales.
To be fair, Apple has reduced iPhone X lead times significantly over the past month. Recently, it has been promising delivery in as little as eight days for orders placed through its U.S. online store. On the other hand, retail inventory remains minimal. Most Apple Store locations are still sold out of most iPhone X configurations.
The Chinese New Year could give a further boost to iPhone X demand in early 2018. After all, Apple has been particularly successful in China when it has released iPhone models with a brand-new "iconic" design.
The average selling price is set to surge
Ever since Apple released its first large-screen phones in late 2014, the iPhone's average selling price (ASP) has been moving higher. Last fall, the iPhone ASP hit a record high of nearly $695.
Due to the iPhone X release last month, the iPhone ASP is sure to surpass the $700 mark this quarter. In fact, $800 could even be within reach, for three reasons. First, Apple appears to have significantly increased iPhone X production in the past few weeks, so the most expensive iPhone model will account for a meaningful proportion of this quarter's shipments.
Second, Apple bumped up the price of the base model iPhone 8 and iPhone 8 Plus by $50 and $30, respectively, compared to what it charged for the iPhone 7 and iPhone 7 Plus a year ago.
Third, demand continues to shift toward larger-screen models. Usage of the iPhone 8 Plus has been comfortably ahead of iPhone 8 usage since day one, reversing the trend seen in each of the three previous years.
The net result is that Apple customers are paying more than ever for their iPhones. This will drive huge revenue growth for Apple in the current quarter -- and beyond.
Find out why Apple is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. (In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the market!*)
Tom and David just revealed their ten top stock picks for investors to buy right now. Apple is on the list -- but there are nine others you may be overlooking.
*Stock Advisor returns as of November 6, 2017
Adam Levine-Weinberg 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 is long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.