KeyBanc analyst John Vinh told clients today that demand for Apple’s (NASDAQ:) iPhone lineup remains resilient with an expectation of iPhone SE.

KeyBanc’s checks showed that the customer demand for iPhone 13 remained “healthy” in March and “largely in line with store expectations.” The domestic iPhone sales likely soared 12% in March on a MoM basis, but still flat y/y.

Vinh says that the high demand was fueled by better supply, tax refunds, and the release of the new green iPhone. This is slightly more than what Vinh expected.

“Store inventory levels for Pro/Pro Max increased further, and all the stores we surveyed have either Pro or Pro Max inventory vs. ~70% in February. In aggregate, Days of inventory (DOI) increased m/m to just over two days but remain lean and well below targeted levels,” Vinh said in a client note.

Apple’s iPhone SE campaign is facing another disappointment.

KeyBanc’s data shows “disappointing” SE3 sell-through, or below store expectations. Lower-than-expected sales resulted is high inventory, which can be walked-in by customers.

This analyst discusses why it may be so.

“Promotions on other models overshadow the price advantage of the new SE3, such as AT&T offering iPhone 12 discounted at $365 amortized over 36 months vs. $430 for the SE3, both of which are 5G capable and without trade-in. Customers’ awareness for the release is relatively low and consumers’ preference for larger form factor continues to grow, despite SE3 retaining the Home button,” Vinh added.

Vinh revised overall estimates to take into account key findings in this report. While the Q2 iPhone sales are still at 58.3 Million, which is above 57.7million, iPhone revenue has risen by 1.1% and now stands at $49 Billion.

“Our Key First Look Data suggests AAPL is tracking somewhat in line with consensus. C1Q Apple’s F2Q Apple Hardware has seen a -35% increase in q/q during the past three year. This is against the consensus C1Q22 estimate of 29% and our estimation of -30% respectively. Our data does not indicate any material upside. The main problem we see is in discretionary spending within the accessories and wearables segments. With the iPhone SE3 initially disappointing and AAPL build forecast being lowered and being replaced with iPhone 13, we slightly revise our iPhone mix assumptions,” Vinh concluded.

By Senad Karaahmetovic