As usual, there's no easy way to peg estimates for Apple's (NASDAQ:AAPL) fiscal fourth-quarter iPhone shipments. Thanks to the timing of the tech giant's annual iPhone launches, the period typically includes about a 10-day period in which the latest models are sold. This year is no exception, with the iPhone XS and XS Max deliveries beginning on Sept. 21 -- over a week before the quarter ends.
Of course, Apple has made matters even more complicated recently by releasing different versions of its newest iPhones during different months. Last year, the iPhone 8 and 8 Plus were released in September, while iPhone X shipments didn't begin until November. This year, iPhone XR shipments don't start until late October. This means forecasting Apple's fiscal fourth-quarter iPhone shipments requires some guesswork as to which iPhone models customers will prefer.
Nevertheless, it's still possible to at least make a ballpark estimate for Apple's iPhone sales during the quarter.
A wild guess
One way to get some context for Apple's current quarter is to look to third-party forecasts. Rosenblatt analyst Jun Zhang, for instance, believes more consumers will be holding out to buy Apple's iPhone XR. In the meantime, Zhang estimates Apple has racked up about 10 million pre-orders for the iPhone XS and XS Max. KGI Securities analyst Ming-Chi Kuo similarly expects the iPhone XR to be the most popular new iPhone model.
Of course, if these forecasts are true, this is actually a similar narrative to last year. The iPhone X, which was launched during Apple's first quarter of fiscal 2018, proved to be Apple's most popular new iPhone. This could mean that Apple will see similar trends in the sales of its new iPhones during the tail end of its fourth quarter this year.
While investors may glean some insight into iPhone sales trends by considering third-party forecasts, the most reliable way to get a window into the quarter is likely Apple's revenue guidance for the period. For its fourth quarter, Apple guided for revenue to rise about 16% year over year. Since the iPhone accounts for over half of Apple's revenue, this estimated growth rate usually corresponds closely to the growth that management expects from iPhone revenue.
Of course, even this method requires some major adjustments to forecast Apple's iPhone unit sales during the quarter. Even if Apple expected iPhone revenue to climb about 16% year over year in Q4, the product's recent higher average selling prices mean that revenue growth has significantly exceeded unit sales growth. In Apple's most recent quarter, for instance, iPhone revenue increased 20% year over year even though iPhone unit sales rose just 1%.
Considering recent trends in iPhone sales, third-party estimates and data, and management's guidance for Q4, Apple's iPhone revenue will likely rise 10% to 20% year over year while unit sales will likely be close to flat compared to the year-ago quarter, or around the 46.7 million units Apple shipped last year.
What really matters
It's comforting that a quick analysis of Apple's iPhone business suggests another quarter of revenue growth for this important segment is likely. But the more important narrative for investors is the overall trajectory of Apple's revenue and earnings per share.
As long as the company continues to grow its overall revenue and EPS at double-digit rates, the tech giant can easily live up to its fairly conservative valuation. While the iPhone is certainly key to Apple achieving this, the company has two other fast-growing segments -- services and "other products" -- that are aiding its growth story as well.