Per a new research note from KeyBanc analyst John Vinh (via Reuters), Apple‘s (NASDAQ: AAPL) older iPhone 7-series smartphones are outselling the newly announced iPhone 8-series smartphones — at least in the United States.
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“Many respondents indicated that a meaningful portion of customers are buying iPhone 7 in lieu of the new iPhone 8, given the lack of significant enhancements in the new phone,” Vinh said in a portion of the research note reproduced by Reuters.
Although I take issue with the claim that the iPhone 8-series doesn’t include so-called “significant enhancements” and even believe that the iPhone 8 is, over the long-term, a better value than the iPhone 7 I can see why typical smartphone buyers might gravitate to the cheaper iPhone 7-series devices over the newer iPhone 8-series devices.
Similar on the surface
Make no mistake: Apple upgraded virtually everything in the iPhone 8 compared to the iPhone 7. The screens now have True Tone technology, the speakers are louder, the cameras are much better, the processor inside is significantly faster, and the phones have support for fast charging and wireless charging.
Virtually everything other than the form factor and underlying display panel has changed generation-over-generation.
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However, for the average consumer — who might not have even watched Apple’s Sept. 12 launch event keynote, during which Apple explained the generational improvements in iPhone 8 compared to iPhone 7 — these enhancements might be unclear.
Indeed, I’d argue that it’d be difficult for the average customer to really discern the differences between the iPhone 7 and the iPhone 8 after just using the devices for a little while at a retail store. The improvements in the iPhone 8 Plus compared to the iPhone 7 Plus have been obvious during daily use, in my experience.
This problem goes away next year
Next year, Apple is expected to launch three new iPhones: two that look like this year’s iPhone X, and one with a liquid crystal display, just as this year’s models have.
The key difference is that, per KGI Securities analyst Ming-Chi Kuo, Apple intends to abandon its Touch ID fingerprint recognition technology in favor of its Face ID facial recognition technology across all new iPhones next year.
This, coupled with a shift to a display with an 18.5-by-9 aspect ratio (in other words, taller than the current iPhone displays, which come in a 16-by-9 aspect ratio), could mean that Apple’s lowest-priced flagship smartphone next year will look substantially different from this year’s iPhone 8 and iPhone 8 Plus.
Upgraded specifications coupled with a sleeker design could encourage customers to — should they have the financial means to do so — opt for the pricier LCD iPhone instead of what will likely be discounted iPhone 8 and iPhone 8 Plus phones. This could help Apple sell, on average, more expensive iPhones during the next product cycle, helping to increase Apple’s iPhone revenue and profits.
Since most of Apple’s revenue comes from iPhone sales (iPhone revenue made up more than 54% of Apple’s total revenue last quarter, which is one of the weakest quarters in the year for iPhone sales), a boost in Apple’s iPhone business could translate into a nice jump for Apple’s overall financial performance and therefore the stock price.
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Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.