For Apple (AAPL 1.01%) investors, it's hard to ignore the fact that the company has become an iPhone-driven company. Over the past two years, the device has gone from near parity with the rest of the company to nearly two-thirds of its revenue haul. While some of that is due to its struggling iPad division, most is due to Apple's tremendous iPhone growth. For a graphical representation of Apple's iPhone versus the rest of the company, see the chart below:
For investors, this comes with both rewards and risks. On one hand, investors have benefited from top-line growth and bottom-line expansion from Apple's highest-margin product. On the other hand, however, is the growing risk of Apple becoming a single-product company. Even Apple addressed this potential risk with a new disclosure in its last quarterly report.
More recently, concerns about Apple's iPhone growth have started to surface. There are two numbers that investors should know: 10 million and 75 million. The first figure is prior-gen iPhone 6 and iPhone 6 Plus models the company sold in their first weekend. The second represents total iPhone units the company sold in last year's corresponding first quarter.
Can Apple do it?
For the first-weekend numbers for the latest iPhones, which should be revealed on Sept. 28, it seems Cupertino is quite confident in its ability to surpass the envious figure it attained last year. According to a spokesperson, the company is "on pace" to beat last year's record of 10 million sales based upon weekend preorders versus last year's, with the larger iPhone 6s Plus experiencing "exceptional demand," per The Wall Street Journal.
Interestingly enough, there's a lack of specificity in Apple's disclosure in terms of actual preorders. That stands in contrast to last year, when the company noted "4 million preorders" in the first 24 hours. And while the disclosure is positive for the stock, it's perhaps an unfair comparison between last year's total and this year's as high-demand China is included in the initial rollout this year while the country had to wait until mid-October last year due to a licensing delay.
Still, ultimately the most important number is the second (total iPhone units sold in the quarter), which will be disclosed along with the company's first-quarter results early next year. Apple's Q1 ends in December.
Here's how Apple gets to 75 million units
It's an ambitious goal, but Apple has a few strengths. The first, which was just discussed, is strong contribution from its new iPhone 6s and iPhone 6s Plus iterations. If the initial preorder estimates are true, and demand continues, the company should receive strong contributions from these models. And that's important, as the new device is the biggest factor in quarterly sales. But there are two factors, one entirely new, that could lessen its importance.
The first is a price cut for the highly popular iPhone 6 and iPhone 6 Plus, which are now $100 less than before the iPhone 6s event. For those who don't need the newest processor, camera upgrade, and 3D Touch feature, this is the lowest price you can pay for Apple's larger form factors, and should result in strong sales for an off-gen product.
The second, and perhaps more exciting thing, is Apple's new financing plan. While Apple's certainly not innovating here, and the plan isn't as generous as leasing options offered through many carriers, it is another option to move units without asking $650 (or more!) at once.
The genius of the program is it forces wireless providers to offer more generous options to prevent consumers from buying unlocked units and truly shopping for carriers, considering most are moving away from device subsidies. It's no surprise that Sprint and T-Mobile are offering promotional rates on the new units. All the while, Apple books a sale, and takes one step closer to that 75 million units sold figure.