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2 Good Signs for Apple's iPhone 12

Apple (NASDAQ: AAPL) kicked off pre-orders for certain models in its newest iPhone 12 lineup last Friday ahead of shipping the new flagship smartphone this coming Friday. Expectations around this upgrade cycle have been particularly high, thanks in part to the inclusion of 5G cellular technology, even though many average consumers may not notice the difference depending on local 5G coverage and other factors.

Still, there are already two promising signs regarding this year's iPhone launch.

iPhone 12 Pro and 12 Pro Max in gold

iPhone 12 Pro and 12 Pro Max. Image source: Apple.

Pre-order volumes are up, and Pro models are seeing strong demand

For starters, the sheer volume of pre-orders more than doubled compared to last year's iPhone 11 pre-orders, according to respected Apple analyst Ming-Chi Kuo of TF International Securities. The analyst estimates that there were 2 million iPhone 12 units ordered in the first 24 hours, compared to just 800,000 orders for the iPhone 11, 9to5Mac reports.

It's worth noting that pre-orders have started for only two out of the four new models: the iPhone 12 and 12 Pro. The smaller iPhone 12 Mini and larger iPhone 12 Pro Max don't ship until next month, with pre-orders starting in early November. The pre-order activity that investors are seeing now only captures part of the overall demand.

Additionally, the demand for the higher-end $999 iPhone 12 Pro is proving to be much stronger than expected. Kuo had previously thought the standard $799 iPhone 12 would be the most popular model by a significant margin, but so far pre-orders for each model are relatively comparable.

"The ‌iPhone 12 Pro‌ pre-order beat our expectation because of Apple core fans' initial preference for high-end models, the strong demand in the Chinese market, and the coming peak season demand in the US and Europe," Kuo wrote in a research note to investors, according to MacRumors.

China, the world's largest smartphone market, is currently ahead of the U.S. in terms of overall 5G coverage. All four of the new iPhone 12 models will support the new cellular standard, including both mmWave and sub-6 GHz frequencies for all models, so connectivity is not what's driving demand for the Pro models. However, Chinese consumers have long demonstrated a strong preference for larger phones, so Kuo is decreasing his estimates for the forthcoming iPhone 12 Mini that has a smaller 5.4-inch display.

The analyst has now tweaked his estimates on the iPhone product mix.

Model

Mix Estimate (Previous)

Mix Estimate (Current)

iPhone 12 Mini

20% to 25%

10% to 15%

iPhone 12

40% to 45%

30% to 35%

iPhone 12 Pro

15% to 20%

30% to 35%

iPhone 12 Pro Max

15% to 20%

15% to 20%

Data sources: MacRumors and 9to5Mac.

That apparent shift in demand bodes well for average selling prices (ASPs), as more expensive models carry higher margins. The iPhone 12 lineup is expected to be less profitable than the iPhone 11, thanks in large part to the inclusion of 5G, so every little bit of extra profitability will help.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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