How iPhone sales correlate with Google search results
Longbow's Shawn Harrison and Frank Carson rate AAPL a "buy" with a $140 price target, based in part on their tracking of Google search interest around the launches of new iPhones. Interest in iPhone 7 is "close" to that showed for iPhone 6 - Apple's biggest ever product launch - they say.
That's a contrast to many of their colleagues, who for months have been predicting further declines in iPhone sales because iPhone 7 looked like an unexciting improvement on the existing product that many users might decide to skip until next year.
Bernstein is calling for a 5% decline in units sold in the December quarter, and Credit Suisse thinks there may be a decline of up tp 7% for the year. Barclays recently removed Apple from its "top pick" list - where it had been for a year.
But they might be wrong, according to the Longbow team:
"Google search trends for the iPhone 7 remain well ahead of the iPhone 6s while tracking closer to the iPhone 6 launch. Google iPhone searches are correlated to iPhone shipments (R = 0.79) and predictive of future shipments (R2 = 0.63)."
"... We reviewed the period 5 days preceding the new iPhone announcement event and the 11 days post. The iPhone 7 is off to a better start vs. the iPhone 6s and tracking closer to the iPhone 6, but the staying power of demand remains the unknown."
Here is what that looks like in a chart. Not shown on the graph is Q4 2016, when iPhone 7 sales will be disclosed. Longbow's prediction is that the black line representing search will shoot skyward the way it did for iPhone 6, and sales for iPhone 7 will match:
iPhone 7 had much better search action than even the blockbuster iPhone 6, Longbow says:
- iPhone 7 vs. iPhone 6s:
- 5 days leading up to the CY16 announcement, the iPhone 7 averaged 40 search results for every 10 of the iPhone 6s.
- On the day of the announcement, the iPhone 7 averaged 228 search results for every 10 of the iPhone 6s.
- 11 days post, the iPhone 7 averaged 36-167 search results for every 10 of the iPhone 6s.
- iPhone 7 vs. iPhone 6:
- 5 days leading up to the CY16 announcement date, the iPhone 7 averaged roughly 20 search results for every 10 of the iPhone 6.
- On the day of the announcement, the iPhone 7 averaged 114 search results for every 10 of the iPhone 6.
- 11 days post, the iPhone 7 averaged 21-100 search results for every 10 of the iPhone 6.
It's interesting stuff but not a slam-dunk case. A UBS analysis of search results recently showed the opposite: That searches indicated declining interest in iPhone 7.
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