KeyBanc Survey: iPhone BOGO Promos Have Limited Inventory Effect

Apple Inc. (NASDAQ: AAPL) introduced a buy-one-get-one-free promotion earlier this year for its iPhone devices, including the high-end iPhone X. The promotions have had a "limited impact" on lowering iPhone inventories, according to KeyBanc Capital Markets.

The Analyst

KeyBanc Capital Markets' John Vinh.

The Thesis

Apple's iPhone inventories declined month-over-month in February, but days of inventory remained flat month-over-month at around five days, according to a KeyBanc carrier survey.

Stores that sell iPhones found that sell-through of the iPhone 8 was "slightly better than expected, but sell-through for the iPhone X was "disappointing," Vinh said. 

Stores cited the high cost of the iPhone X, which retails for $300 more than the iPhone 8, as a headwind and also said they saw a "significant reduction" in the number of iPhone X shipments received, the analyst said. 

Apple could face a "moderate risk" of an inventory correction, as iPhone inventories remain elevated versus prior cycles but are still under the targeted six-to-10 day range, according to KeyBanc. 

Even a moderate risk implies "limited near-term catalysts" for the Apple supply chain, Vinh said. But over the longer term, the analyst continues to recommend investors own three companies in Apple's supply chain:

• Broadcom Ltd (NASDAQ: AVGO)
• Skyworks Solutions Inc (NASDAQ: SWKS)
• Synaptics, Incorporated (NASDAQ: SYN)

Price Action

Apple shares were up 1.72 percent at the close Friday at $179.98.

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Photo courtesy of Apple.