The buzz around the new iPhone 16 has been met with mixed signals. While lead times for the device are shorter than those for its predecessor, the iPhone 15, some are wondering if this signals weaker demand.
Goldman Sachs analyst Michael Ng, however, remains optimistic about Apple’s performance, maintaining a ‘Buy’ rating on the company with a $276 price target. In a recent note, Ng explains that shorter lead times don’t necessarily equate to lower demand, particularly when considering the inventory levels. He points out that the inventory for the iPhone 16 launch was particularly lean, potentially playing a significant role in the shorter lead times.
Adding to the optimism, T-Mobile CEO Mike Sievert has publicly stated that iPhone 16 sales are exceeding last year’s figures. He specifically highlighted the strong demand for the Pro and Pro Max models, suggesting that consumers are opting for higher-end devices. This trend, known as ‘premiumization,’ seems to be reflected in the extended lead times for the Pro and Pro Max models compared to the base and Plus models.
Ng suggests that the longer lead times for the Pro and Pro Max models indicate a strong preference for the more powerful chip and larger display offered by these models. While lead times for these models are longer compared to the previous generation, they are still notably shorter than the iPhone 15 Pro and Pro Max, by 11 and 19 days respectively.
Despite the mixed signals, Ng remains positive about Apple’s future performance, emphasizing the company’s potential for earnings growth driven by a multi-year iPhone upgrade cycle.
In conclusion, while the shorter lead times for the iPhone 16 compared to the iPhone 15 might raise some concerns about demand, Ng’s analysis suggests a more nuanced perspective. Leaner inventory and strong demand for the higher-end Pro models paint a brighter picture for Apple’s latest flagship, hinting at a continued trend towards premiumization in the smartphone market.
