October 16, 2017 / 2:02 PM / a month ago

U.S. buyers favor iPhone 7 over 8: research

(Reuters) - Apple Inc’s (AAPL.O) older iPhone 7 models are outselling the recently launched iPhone 8 ahead of the early November debut of the premium iPhone X, broker KeyBanc Capital Markets said, citing carrier store surveys.

FILE PHOTO: A man looks at Apple's new iPhone 8 (L) and his iPhone 7 at the Apple Store in Tokyo's Omotesando shopping district, Japan, September 22, 2017. REUTERS/Issei Kato

Traditionally, new editions of the iPhone have sold quickly as fans queue for the latest upgrade, but early surveys have added to chatter that the iPhone 8 is not proving as popular as its predecessors.

U.S. wireless carrier AT&T (T.N) said last week its third-quarter postpaid handset upgrades were fewer by nearly 900,000 from a year ago, and brokerage Jefferies attributed it to weak iPhone 8 demand.

“Many respondents indicated that a meaningful portion of customers are buying iPhone 7 in lieu of the new iPhone 8, given the lack of significant enhancements in the new phone,” KeyBanc analyst John Vinh wrote in a client note.

Vinh also said feedback from stores indicated that customers were waiting to purchase the iPhone X or to compare the iPhone X with other models before buying the iPhone 8.

Apple last month introduced the iPhone 8 and iPhone 8 Plus, which resemble the iPhone 7 but have a glass back for wireless charging. While iPhone 8 starts from $699 in the United States, iPhone 7 is retailing from $549 after a price cut.

The iPhone X, a glass and stainless steel device with an edge-to-edge display, will start shipping from Nov. 3. The 10th-anniversary iPhone is priced from $999 - Apple’s most expensive mobile till date.

One investor in Apple’s shares played down any concern around a dip in sales of the iPhone 7 or 8, given the much-anticipated debut of iPhone X.

“Worrying about any small down-tick in margins from the sale of the iPhone 7 or 8 is a wrong-headed way to look at it as iPhone X is really the flagship device where we’re going to see a strong upgrade cycle,” said Jason Ware, chief investment officer of Albion Financial Group.

Another reason for the slow uptick of the iPhone 8 could be the modest promotion by U.S. carriers.

“While carriers continue to offer promotions for the new iPhone 8, they have been much more modest compared to the iPhone 7 launch last year,” Vinh wrote.

Separately, KeyBanc’s Andy Hargreaves upgraded the stock to “overweight” from “sector weight” and set a price target of $187.

Apple declined to comment.

The company’s shares were up 1.51 percent at $159.36 around midday in New York.

Reporting by Supantha Mukherjee and Tanya Agrawal in Bengaluru; Editing by Maju Samuel and Saumyadeb Chakrabarty

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