Apple iPhone 17 Demand Could Exceed Expectations: Gene Munster Says 'Upside Over The Next Year' Coming
News Summary
Deepwater Asset Management's Gene Munster highlights strong early demand indicators, such as lead times, for the Apple iPhone 17, suggesting upside potential for the stock in the coming year. The average lead time for the iPhone 17 is 2.6 weeks, up from the iPhone 16's average of 1.7 weeks at the same point last year. In China, the average lead time for the iPhone 17 stands at 4.4 weeks, a 119% increase from last year's 2.0 weeks for the iPhone 16. In the United States, lead times are up 57% year-over-year to 1.3 weeks. Munster emphasized China's standout performance, with JD.com reporting iPhone 17 first-day pre-orders exceeding the iPhone 16 launch. Munster estimates Apple's iPhone revenue growth for the current quarter at 8% year-over-year, surpassing the Street's consensus of 7%. He also forecasts 8% iPhone growth for fiscal 2026, beating the Street's 5% estimate. While this growth is an improvement over recent years, it's not a "supercycle," contrasting sharply with the 39% growth seen in fiscal 2021. Munster believes Apple's hardware strength continues to lead and can offset its perceived stumbles in AI, noting that beating estimates and providing higher guidance are crucial for further stock appreciation.
Background
Apple Inc. releases new iPhone models annually, typically sparking widespread market interest regarding their sales performance and the company's stock price. As one of the world's largest technology companies by market capitalization, iPhone sales performance is critical to Apple's overall revenue and profitability. Gene Munster, co-founder of Deepwater Asset Management, is a veteran Apple analyst known for his in-depth research and predictions regarding Apple products. Investors often closely watch his views for insights into Apple's future performance. In recent years, concerns have emerged in the market regarding Apple's progress in artificial intelligence (AI), with some suggesting it might be lagging behind competitors in AI innovation.
In-Depth AI Insights
Given the significantly higher iPhone 17 lead times in China compared to other regions, especially with the 'iPhone Air' facing design approval delays, what does this truly signal about Apple's strategic positioning and market risks in China? - Demand elasticity for Apple's high-end iPhone products in China far exceeds expectations, indicating strong brand loyalty even amidst complex macroeconomic and geopolitical environments. - The delay for iPhone Air's approval might be more than just a design issue, potentially hinting at Chinese governmental policy leanings towards technological self-sufficiency and support for local brands, which could pose future launch hurdles for Apple's new products. - Apple's reliance on the Chinese market remains high. This strong dependence could quickly translate into significant revenue risk if Chinese consumer preferences shift or the regulatory environment tightens further. Gene Munster emphasizes strong hardware demand offsetting AI concerns. Does this imply a fundamental shift in investor calculus for Apple, or is it merely a temporary reprieve that delays an inevitable reckoning on AI capabilities? - In the short term, the market may prioritize Apple's robust hardware iteration capabilities and vast user base for immediate revenue generation, rather than its still-unclear AI strategy. This buys the company more time to refine its AI solutions. - Long-term, the disruptive potential of AI cannot be ignored. If Apple continues to lag in AI and competitors introduce more compelling AI features, the stickiness of its user ecosystem could gradually erode, potentially undermining its leadership in the premium market segment. - This is less a fundamental shift in valuation logic and more the market granting a temporary buffer, awaiting a convincing AI proposition from Apple, with hardware success providing interim support. Despite Munster's upgraded forecasts, he explicitly states this is "not a supercycle." What are the implications for Apple's valuation multiple and future growth trajectory if even strong upgrade cycles are moderating to mid-single-digit growth? - If Apple's iPhone business growth stabilizes at mid-single digits, investors may re-evaluate its premium as a growth stock, potentially leading to downward pressure on its valuation multiple. - To maintain a high valuation, Apple needs to demonstrate new growth engines beyond the iPhone, such as sustained high growth in services, successful adoption of new product categories like Vision Pro, or breakthrough monetization models in new technological domains like AI. - This indicates Apple's moat remains deep, but without "supercycle" level explosive growth, the company must focus more on operational efficiency and new business incubation to justify its long-term value.