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1 Potential Positive for Apple's iPhone Business

By Ashraf Eassa – Dec 27, 2018 at 5:30PM

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After a deluge of bad news, here's a silver lining.

There's little doubt that the news around Apple's (AAPL -2.12%) latest iPhones has been quite negative over the last several weeks. Key suppliers have slashed revenue guidance for the current quarter, there have been reports of production cuts for the latest iPhone models, and some analysts have been lowering their price targets on the stock due to potentially weak iPhone sales. 

Let's just say that if you've been holding on to Apple stock, it hasn't been an easy ride.

Apple's iPhone X lineup.

Image source: Apple.

To brighten the outlook, Consumer Intelligence Research Partners (CIRP) -- via the website 9to5Mac -- has shared some data on Apple's iPhone sales mix in the United States. It wasn't universally positive; indeed, it showed that, in aggregate, sales of this year's new iPhone models is lower as a percentage of total sales than last year's models were. But there was one encouraging data point. 

The successful iPhone XS Max

According to the data from CIRP, the iPhone XR was Apple's best-selling iPhone in the United States during November. This isn't terribly surprising, especially considering that Apple executive Greg Joswiak said, "[since] the iPhone XR became available, it's been the best-selling iPhone each and every day that it's been on sale." 

The data point I thought was most interesting was that the iPhone XS Max -- the company's priciest device -- was its second-best-selling model. In third place was the standard iPhone XS -- the direct successor to last year's iPhone X.

There had been reports following the availability of the iPhone XS and iPhone XS Max that customers seemed to prefer the iPhone XS Max over the iPhone X, but the CIRP report provides some more concrete information about the relative sales mix of the different models in a geographic region that's important to the iPhone maker. 

What this data seems to suggest is that customers find enough value in the iPhone XS Max to pay the extra $100 on top of the already high baseline price of the iPhone XS. (As a reminder, the iPhone XS starts at $999 for the 64GB model and goes all the way up to $1,349 for the version with 512GB of storage.) 

From the perspective of iPhone average selling prices, customers opting for the iPhone XS Max in lieu of the iPhone XS is a good thing.

One more thing

Another thing that stood out is that while in November 2018, the iPhone XR made up a smaller proportion of overall sales than did the iPhone 8 and iPhone 8 Plus did in November 2017, the iPhone XS and iPhone XS Max combined actually made up a bigger portion of unit sales this November than the iPhone X did in November 2017.

It's worth noting that the iPhone X was available for sale in the United States beginning Nov. 3, 2017, so the iPhone XS and iPhone XS Max were technically available for longer in November 2018 than the iPhone X was in November 2017 (although Apple was taking orders beginning on Oct. 27, 2017, which may have blunted that three-day advantage). 

Nevertheless, it seems that -- at least in the United States -- the combination of the iPhone XS and iPhone XS Max was more successful than the iPhone X was in the prior year. And that -- in general -- seems like a positive for iPhone average selling prices in the U.S. as well as its brand strength (I can't imagine other smartphone makers being able to move that many $999-plus smartphones in a month.)

We'll know more about how the iPhone business performed in aggregate once the company reports its earnings results, which should be either in late January or early February of 2019.

Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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