Analysts predict drop in average iPhone selling price, growth in services to make up the difference

Ahead of Apple’s financial earnings call covering the holiday quarter, analysts are speculating that the average selling price for iPhones has declined. A report from Bloomberg shares that even though there may be growth for total iPhone units shipped compared with the year ago quarter, predictions say it will be the strong rise in Apple’s services that will increase revenue for the quarter.

Analysts currently predict an average selling price, or ASP, of $688 for the iPhone line in the holiday quarter, down from $691 a year earlier, according to estimates compiled by Bloomberg News.

At first, a $3 decline per iPhone doesn’t sound like a lot, but when you consider multiplying that times the estimated 76 million iPhone sold in the holiday quarter, it’s almost a quarter of a billion dollar revenue decrease. Analyst Mark Moskowitz detailed why the average selling is likely dropping.

“Recent smartphone customers increasingly are opting for the iPhone 6S,” Barclays analyst Mark Moskowitz wrote in a note to clients this week as he downgraded his recommendation on Apple stock to hold. “We detect increasing concern among industry participants that smartphones in general have evolved technologically to become more than good enough to serve most users’ digital needs over multiple years or until the device breaks.”

Another factor that contributed to the lower average iPhone prices was the iPhone SE. In previous years, an iPhone launch meant an increase in average selling price, but as Bloomberg’s graph shows, the iPhone SE dramatically changed that trend and continues to lower the ASP post iPhone 7.

While we’ll have to wait until Tuesday to know the actual results. All of this will likely put more pressure on Apple to knock it out of the park with this year’s iPhone release.

Even after revenue from services soared last year, the iPhone still accounted for almost two-thirds of Apple’s $216 billion annual sales. The handset’s importance means any ASP weakness will focus investor attention more keenly on the next iPhone, which is likely to be unveiled later this year, the device’s 10th anniversary.