Apple May Not Be Able To Meet iPhone X Demand, Which Could Be A Good Thing

In many cases, a company not being able to satisfy demand is a good problem to have. This may prove to be especially true for Apple Inc. (NASDAQ: AAPL), according to Canaccord Genuity's T. Michael Walkley.

Demand for Apple's high-end $1,000 iPhone X will likely prove to be stronger than the company's ability to meet supply in 2017, Walkley wrote in a research report. The iPhone's compelling features, including an OLED display, a strong battery, wireless charging and overall improved functionality will contribute to an estimated 247 million units sold in 2018.

Overall, Apple continues to gain market share in the premium-tier smartphone space where it is already a leader, Walkley said (see his track record here).

Meanwhile, demand for the iPhone 8 and 8 Plus remains "solid" although weaker versus the iPhone 7 launch. However, this is seen as a positive as it is likely many would be iPhone 8 buyers are waiting for the higher priced iPhone X.

Overall, Apple should benefit from a strong global iPhone replacement rate of 26.8 percent in 2017. Encouragingly, the global replacement rate will likely rise to 32.4 percent in 2018 and will then moderate to 29.0 percent in 2018.

"This impressive installed base should drive strong iPhone replacement sales and earnings, as well as cash flow generation to fund strong long-term capital returns," Walkley wrote.

The analyst maintains a Buy rating on Apple's stock with an unchanged $180 price target.

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