More Good News for Apple's iPhone Average Selling Prices

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There were already initial indications that demand for Apple's (NASDAQ: AAPL) new $1,100 phone was strong, with shipping estimates promptly slipping as soon as the iPhone XS Max was available for pre-order earlier this month. Meanwhile, iPhone XS demand seems lukewarm, likely since the improvements over last year's iPhone X are incremental and don't fully justify upgrading, especially when you consider how expensive the devices are.

The iPhone XS and XS Max officially launched last weekend, and demand appears to be disproportionately concentrated on the XS Max model, which is good news for Apple's iPhone average selling prices (ASPs).

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It's going to be a merry iPhone XS Max Xmas

Respected Apple analyst Ming-Chi Kuo put out a research note this week (via MacRumors) that says XS Max demand is coming in much better than expected, potentially outstripping demand for the XS by three to four times. The 256 GB storage option, priced at $1,249, is the most popular configuration, according to Kuo.

The 512 GB models are suffering from supply constraints, though, as Samsung as the only supplier for NAND flash storage that is shipping the components reliably. As the manufacturing ramp matures, hopefully Apple can resolve any 512 GB flash shortages, as that configuration costs an astounding $1,449, making it the most expensive iPhone Apple has ever made.

iPhone XS Max unit volumes are expected to "grow steadily" in the fourth quarter due to strong demand in Asia, as well as the holiday shopping season. The XS Max has a very strong potential to tap into two key demand drivers in Asian markets: bigger phones and an affinity for the color gold.

Apple Watch Series 4 also selling well

Additionally, the new Apple Watch Series 4 is enjoying robust demand, as this year's model represents the most meaningful update to the smartwatch to date, featuring a much larger display and new form factor. Contract manufacturer Quanta is already at maximum capacity, and Apple is not expected to bring on secondary assembler Compal until later this year, according to the research note.

Apple was already maintaining its healthy lead in the wearables market even ahead of the Series 4 unveiling. With Series 4 putting up a strong showing right out of the gate, Apple will only further distance itself from the competition.

The Mac maker was clearly expecting strong sales of the new gadgets. Its outlook for the fiscal fourth quarter (which closes on Saturday) calls for revenue of $60 billion to $62 billion, equivalent to 16% growth from last year at the midpoint. That would represent the fifth consecutive quarter of accelerating revenue growth, and does not include any other new products that Apple might be unveiling next month.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.