Apple poised to benefit from more favorable component pricing

Posted:
in AAPL Investors edited January 2014
Pricing for memory, NAND flash memory and displays in Apple's overseas component supply chain is said to be improving, positioning to place the company in a favorable and more profitable position in the coming months.



Citing sources in Apple's overseas supply chain, analyst Shaw Wu with Sterne Agee reported to investors on Wednesday that overall component trends continue to improve through July. The situation has resulted in more favorable pricing, which he believes will be poised to profit from this change.



Wu said that Apple has, in the past, proven to be among the most adept in the technology industry to take advantage of lower pricing. That strength has been largely credited to Chief Operating Officer Tim Cook.



"This is the opposite of what we saw earlier this year due to the unfortunate events in Japan," Wu wrote, "where component pricing is now more a tailwind as opposed to a headwind."



Previous reports suggested that the devastating earthquake and tsunami that struck Japan earlier this year had shaken up the supply chain for Apple and many other technology companies. The situation allegedly forced Apple to diversify and seek out component makers outside of Japan.



While reports of component constraints persisted after the disaster, Apple publicly said that the incident had not greatly affected the company's supplies. Cook also said that the economic effects of the disaster in Japan paled "in comparison to the human impact."







With the anticipated improvement in component pricing, Wu has accordingly raised his forecasted gross margin for Apple to 39.8 percent, up from 39 percent, for the quarter. That has also pushed his predicted gross margin for Apple's fiscal 2011 to 39.5 percent, from 39.2 percent.



On forecasted sales of 6.8 million iPads, 17 million iPhones, 3.9 million Macs and 8.3 million iPods, that would result in an estimated $24.6 billion in revenue and $5.95 earnings per share for the quarter. For fiscal 2011, Wu sees Apple taking $103.7 billion in revenue and $25.35 earnings per share.



Sterne Agee has maintained its buy rating for AAPL stock, with a price target of $460.

Comments

  • Reply 1 of 11
    constable odoconstable odo Posts: 1,041member
    Apple, sitting on a mound of reserve cash can buy, buy, buy components at super-steep discounts. They'll be able to use the cash that the institutional fund managers say is just wasting away collecting next to nothing in interest. It really is going to be hard to beat Apple's long-term strategy. It's being played out just as Steve said it would be. Apple is its own bank. Whether Apple still has too much reserve cash, I don't really know but whatever needs pop up on the horizon, Apple will be able to cover it. Currently, Apple is increasing profits in times where most companies are cutting back, so it's obvious Apple has made the right calls.



    The financial pundits and short-sighted fund managers only see the obvious solutions to turn quick profits but Apple appears to be looking ahead for years. Now, if only some of those profits dribble back to long-term, individual shareholders, things will look a lot better. My fingers are crossed that this quarter will spark Apple shares upward.
  • Reply 2 of 11
    mj1970mj1970 Posts: 9,002member
    Cue: Posts about Apple being obviously greedy if they don't past these cost savings onto their customers in the form of lower prices.
  • Reply 3 of 11
    chabigchabig Posts: 624member
    Quote:
    Originally Posted by MJ1970 View Post


    Cue: Posts about Apple being obviously greedy if they don't past these cost savings onto their customers in the form of lower prices.



    And they should also design and build worse products, so their competitors don't have to work so hard.
  • Reply 4 of 11
    cloudgazercloudgazer Posts: 2,161member
    Quote:
    Originally Posted by MJ1970 View Post


    Cue: Posts about Apple being obviously greedy if they don't past these cost savings onto their customers in the form of lower prices.



    don't forget the inevitable posts about them moving manufacturing to the US, paying 100$/hour in retail, feeding the homeless, curing childhood illnesses, rescuing puppies etc. etc.
  • Reply 5 of 11
    cvaldes1831cvaldes1831 Posts: 1,832member
    Don't forget about the posts about how millions of Android devices are being activated daily, how people are get 10+ hours of battery life with the 4.5" screen 4G LTE Android handsets using them constantly to stream video, etc.



    Oh, also cue posts about how these financial analysts are worthless, they always miss their targets by a broad margin, Wu/Munster/Huberty/Gartner/et al are great barometers of what won't happen, etc.
  • Reply 6 of 11
    mj1970mj1970 Posts: 9,002member
    Quote:
    Originally Posted by cvaldes1831 View Post


    Don't forget about the posts about how millions of Android devices are being activated daily, how people are get 10+ hours of battery life with the 4.5" screen 4G LTE Android handsets using them constantly to stream video, etc.



    Oh, also cue posts about how these financial analysts are worthless, they always miss their targets by a broad margin, Wu/Munster/Huberty/Gartner/et al are great barometers of what won't happen, etc.



    I think there's another thread for that stuff.
  • Reply 7 of 11
    mj1970mj1970 Posts: 9,002member
    I suspect that these component price decreases were built into Apple's business case from the beginning of any of these products. They know from the start they will start to get lower pricing down the road and probably have it timed fairly accurately too. Their product life cycles are probably built around this. So they have the next generation planned which will include a new high-end model (more features, capabilities, etc.) at same top-end price and a new lower price model that's a re-config version of the current model...then the sales growth curve starts to take another bend upward.
  • Reply 8 of 11
    cloudgazercloudgazer Posts: 2,161member
    Quote:
    Originally Posted by MJ1970 View Post


    I suspect that these component price decreases were built into Apple's business case from the beginning of any of these products.



    They did but there were some supply shocks with the Japan quake and demand for NAND Flash seems to have been far greater than anybody expected, with data-centres increasingly adopting it.
  • Reply 9 of 11
    melgrossmelgross Posts: 31,736member
    Quote:
    Originally Posted by MJ1970 View Post


    I think there's another thread for that stuff.



    There is Always another thread on that stuff.
  • Reply 10 of 11
    melgrossmelgross Posts: 31,736member
    Here's stuff from the Apple Financial Board, which is usually much more accurate.



    http://www.postsateventide.com/



    And:



    http://www.postsateventide.com/2011/...ate-index.html



    Notice that our friend Andy Zaky is in there.
  • Reply 11 of 11
    brucepbrucep Posts: 2,823member
    Apple is so well run that they will go from a dollar a share earning to almost 6 dollars a share earning in 6 or 7 yrs .



    Apple is NOW approaching %40 percent gross profit in the next 28 months

    NO DEBT

    70 bn in bank





    Apple offers me

    Iphone<3>Ipad<2>Ipodtouch<1>Ipod<3>Imac<2>Macpro<4 >Macbookpro<3>Macbookair<3>Classicplasticapplenote book<1>appstore<1>Itunes<1>appletv<1>..



    SINCE1986 I HAVE run a 500 g a yr gemstone buisness on only apple products

    Apple gives us 25 choices for fun

    i own 2 mbp 15in highend fully stocked <<<<fast fast fast >

    i own i old IMAC 2006 OR 2005

    I Own a black plastic lap top 2005 i think i run filemaker pro and COD4 PLAYS TOO

    I own 2 old laptop a silver g4 and a 15 white plastic for 2003

    i have dumped or traded or re worked 5 other apple computers

    i own 3 apple TV S

    i own 3 older nano like ipods

    I own 2 > 160g classic ipods

    i own 2 iphone's 64g

    i own i ipod touch

    i own 2 nanos

    i own 5 semi forgotten /broken ipods

    I have 8 ipods or more sold traded or given back to Apple for %10 off next buy

    <<i have 4 here left ist gen 2nd gen <<< back then apple would switch out an apple ipod for a new or new and better one no questions asked fro the flimsyiest reason<>



    i have over 1600 itunes purchases 1300 songs and the balance is tv and movies

    i have DL over 8000 thousand podcasts .



    so after all this money i have spent i wish apple would OPEN A FACTORY IN THE AMERICA's

    ANDA i wish APPLE WOULD INVENT A NEW LONG LASTING LAPTOP FOR A VERY LOW PRICE that would be for schools

    or the kid can buy it cheap on yr 4 Apple with 70bn profit needs to help america 's school kids .





    peace to my buddies in apple spy world





    9

    lostplay

    brucep
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