- iPhone revenue to add $151 billion to Apple’s topline in 2015, implying a staggering segment growth rate of 48%.
- iPhone revenues will be driven by increasing shipments and higher average selling prices fuelled by the iPhone 6 models.
- The huge growth potential, high free cash flow margins and attractive valuations drive our bullish Apple stock analysis.
In our recent post on iPhone unit sales forecast, we had written why iPhone sales will be key short term value drivers for Apple (NASDAQ:AAPL). Following up on our post, we today look at iPhone ASP trends to estimate FY 2015 iPhone revenue.
iPhone unit sales to hit 240 million in FY 2015
In our last Apple post, we had concluded that the iPhone unit sales for FY 2015 will come in at 232 million to 240 million, implying a YoY growth of 37% to 42%. Our forecast was based on the quarterly distribution trends in iPhone unit sales and a regression model adjusted for seasonality. Based on our unit sales forecast, we today estimate the potential iPhone revenue for FY 2015 based on average selling price trends.
iPhone ASP boosted by iPhone 6 launch
iPhone average selling price (ASP) has gradually declined over the last few years, as competition from lower priced android models increased the pressure on the iPhone sales.
iPhone average selling price over last few years
The dip in the ASP was driven by customers opting to buy the older versions of iPhone models by paying $100 less for a year old model or $200 lesser for a two year old model. Example: People buying the iPhone 4S or 4 for lesser money rather than going in for the new iPhone 5. The trend was an indication of the lower incremental value (in terms of features) people saw in owning the latest models.
However, the ASP trend has likely reversed since the introduction of the iPhone 6 models. The ASP has ticked higher over the last two quarters, following the launch of the latest iPhone models in September 2014.
|in $||Q4 2014||Q1 2015|
|Change from previous year||25.7||50.4|
The ASP increased by $25.7 in Q4 2014 (September quarter) as compared to Q4 2013 and rose by an even more impressive $50 in Q1 2015 (December 2014 quarter). The ASP increase can be largely attributed to two factors:
- iPhone 6 models were priced $100 higher than previous models at time of their launch, due to higher storage capacity tiers.
- iPhone 6 fulfilled a pent up demand for larger screen sized phones among Apple loyalists. The large screen market was previously untapped as far as Apple was concerned.
The increase in ASP will continue as the iPhone 6 models gain a larger share of iPhone sales through FY 2015. Taking into account the impact of the iPhone 6, we estimate iPhone ASP to come in close to $640 for FY 2015.
|Shipments at midpoint of our estimates (in millions)||236.0|
|iPhone revenue ($, in billions)||151.04|
Using our ASP and shipment estimates, we expect iPhone to add $151 billion to Apple’s FY 2015 revenues. Our revenue estimates imply YoY revenue growth of 48%, which is huge by any standard. It is spectacular when you consider the base revenue of $102 billion generated in FY 2014.
In summary, iPhone will continue to drive strong topline and bottomline growth for Apple in FY 2015, helped by a higher ASP and increasing unit sales. We estimate the product segment to top $151 billion, implying a huge 48% YoY growth rate. The huge growth potential, high free cash flow margins and attractive valuations make Apple a stock to own. We re-iterate our bullish outlook on Apple stock, which is reflected in our Apple stock analysis.