While most on Wall Street expect the average selling price of the iPhone will drop this holiday season, RBC Capital Markets believes the greater capabilities of the iPhone 7 Plus could have a counter effect, resulting in stronger-than-anticipated earnings per share for Apple.
iPhone ASPs could bring some so-called "wow factor" to Apple's earnings per share this December quarter, analyst Amit Darnyanani said in a note to investors on Friday. Based on surveys conducted by RBC, he believes iPhone ASPs could be flat or even modestly up year over year, thanks largely to the upsell factor of the camera iPhone 7 Plus.
In addition, he noted that Apple is charging a $120 premium for the iPhone 7 Plus. That's an increase from the past two years, when 5.5-inch models were $100 more expensive than the 4.7 inch versions of new iPhones.
In contrast, current models on Wall Street call for iPhone ASPs to be down between 5 and 10 percent. So even if iPhone prices hold flat year over year, Daryanani believes that could be an upside surprise for investors.
RBC rates shares of AAPL to "outperform" with a target price of $125.
One factor working against iPhone ASPs, however, is Apple's new higher capacity models. Rather than starting with an entry level of 16 gigabytes, Apple's latest models ship with a minimum of 32 gigabytes, which could result in fewer people opting for more spacious models, Daryanani noted.
RBC's survey found that 46 percent of respondents plan to buy Apple's larger 5.5-inch handsets, including both the iPhone 7 Plus and the newly reduced price iPhone 6s Plus. In addition, this year there is a stronger preference for the newer iPhone 7 series than the then-flagship iPhone 6s inspired a year ago.
For the just-concluded September quarter, RBC has forecast revenue at $47.3 billion and earnings per share of $1.68, on sales of 44.2 million iPhones. Those numbers compare to Wall Street at $46.9 billion and $1.66.
And in the December quarter, RBC is calling for sales of 79 million iPhones, which would be a new record for Apple, leading to $78.9 billion in revenue and $3.34 earnings per share. Wall Street, meanwhile, expects about 75 million iPhone sales, revenue of $74.3 billion, and $3.18 EPS.
RBC rates shares of AAPL to "outperform" with a target price of $125.
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