Cramer's Charitable Trust: Apple's iPhone Preorders Are Off the Hook

 | Sep 14, 2015 | 2:48 PM EDT
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The following commentary was originally sent to Action Alerts PLUS subscribers on Sept. 14, 2015, at 1:23 p.m. ET.

Less than a week after their respective unveilings, Apple's (AAPL) iPhone 6s and 6s Plus preorders are already off to a huge start. The company announced this morning that its latest versions of the smartphone are on pace to exceed last year's first weekend sales of 10 million units. More specifically, Apple noted that it hit a first-day preorder record, with sales of more than 4 million units. The preorder period for the phone launched Saturday, and phones will begin shipping Sept. 25. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)

These solid numbers should help put the bear thesis to bed as demand for the company's most prominent product is showing no signs of slowing down. Since the company's last earnings report, investors have worried over concerns with China's economy and the potential slowdown of iPhone sales. Importantly, China was included in this initial launch of the iPhone, which marks the first time the region was allowed to preorder the smartphone during the opening promotion. We find this to be a telling, positive sign for the company as it shows the confidence in sustained demand in the region.

That being said, while this is a good indicator of the company's perception of business in the region, we do note that the addition of China to the global launch (and New Zealand, which was the only other country added to the usual suspects) does play a role in the company beating last year's first weekend sales of 10 million units. For example, Piper Jaffray analysts suspect total opening weekend sales should fall between 12 million and 13 million units, approximately 2 million of which will come from China. Normalizing for the China addition, this would put the iPhone 6s launch at a 10% increase, at best, vs. last year. Piper has the overall 6s cycle at +3% units year over year, while the Street is expecting a flat performance. We expect these estimates could change after this most recent positive report.

All in, we are very pleased, albeit not surprised, to see these encouraging numbers for the iPhone 6s and 6s Plus. As we all know, the phone is the most important product for the company (although we are also exhilarated by the overall ecosystem with updated computers, Apple TV, iPads, etc.), and this news shows demand remains strong. Importantly, it also proves that the company continues to innovate, both visually (added a rose gold option) and technically (3D Touch, better camera, etc. -- see last week's roundup for more details), in ways that matter to the customer.

We think the selloff has largely passed for Apple stock and we expect shares to go higher as we get even more clarity on iPhone 6s demand and appeal for some of their updated products (iPad Pro and Apple TV, in particular). Our target remains $150.

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