Apple warns of limited iPhone 7 supplies ahead of tomorrow's retail launch

Source: Flickr user Clement Chene

Apple warned it will have limited stocks of the iPhone 7 Plus in retail stores at launch tomorrow, adding to heightened expectations for its newest flagship. But analysts don’t entirely agree what to make of the news.

Initial shipments of the iPhone 7 Plus in all colors sold out globally during preorders, Apple said in a statement issued to multiple news outlets, and won’t be available on Apple Store shelves Friday. The smaller iPhone 7 in the new jet black is also sold out.

"We sincerely appreciate our customers' patience as we work hard to get the new iPhone into the hands of everyone who wants one as quickly as possible," Apple spokeswoman Trudy Muller said in prepared statement, Reuters reported.

The development is the latest indication that the iPhone 7 could be a much-needed success for Apple. Both T-Mobile and Sprint announced surprisingly strong pre-orders for the handset earlier this week, and New Street Research recently reported notable pent-up demand for Apple’s next phone.

That demand is being fueled by aggressive marketing campaigns from mobile network operators eager to use the device to grow their subscriber bases. BayStreet Research’s Cliff Maldonado said recently that the phone is enjoying “unprecedented” promotional support from all four major U.S. carriers. UBS analysts echoed that sentiment, adding that strong carrier demand for the iPhone could weigh on industry margins as competition ramps up.

But while demand certainly appears to be high for the new phone, other factors may have something to do with constrained launch supplies, analysts at Wells Fargo Securities wrote.

“We are surprised this is new news as Apple indicted that it would not be giving first-weekend sales numbers because the numbers reflect supply rather than demand,” Wells Fargo wrote in a research note to investors. “Additionally, we believe the more aggressive country launches (28 countries on Day 1 vs. 12 countries last year) had an impact on supply, creating the optics of heightened demand, and we note that the iPhone 6 (viewed as a super cycle) still had availability on Day 1.”

BTIG Research appeared to be more bullish following the news of strong preorders, however. Neither Verizon nor AT&T have disclosed ballpark figures for iPhone 7 preorders as T-Mobile and Sprint have done, but they have indicated those sales have been relatively strong.

“While both (larger carriers) clearly fell far short of the 4x performance of their smaller challengers, it was enough of a clarification to determine that the success of Sprint and T-Mobile are not solely a result of market share declines at the dominant operators,” Walter Piecyk of BTIG wrote. “We do not want to downplay competition too much, as we were surprised to see AT&T and Verizon follow T-Mobile’s free iPhone offer last week, but all things considered, we believe the commentary by the four national wireless operators in the United States, which we estimate represents more than one quarter of launch quarter sales for the iPhone, bode well for a return to iPhone growth in the December quarter.”

BTIG increased its price target for shares of Apple to $133, up from $124. The stock was trading at $114.85 mid-day Thursday.

For more:
- read this Reuters report
- see Piecyk’s blog post

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