JP Morgan adds to Apple supply chain worries, cuts early 2016 iPhone estimates
The parade of analysts concerned about weak outlooks from Apple suppliers continues to grow, with J.P. Morgan on Thursday advising investors that it is reducing near-term forecasts for iPhone sales.
Analyst Rod Hall noted that he still sees AAPL stock as "attractive," and advised investors to use any "weakness" in the stock in early 2016 as an opportunity to increase holdings.
Though J.P Morgan remains "overweight" on Apple, the firm did reduce its March quarter iPhone estimates by 8 percent, or 4.9 million units. Hall now sees Apple shipping 55 million iPhones in the three-month span, which would be a decrease from the 61 million iPhones the company sold in its March 2015 quarter.
Like others who have reduced estimates in recent days, Hall was prompted by Apple suppliers, who have indicated some weakness heading into the coming quarters. Specifically, Hall said that comments by Dialog Semiconductor suggest the March quarter could be weaker than expected, while low numbers from Taiwan Semiconductor Manufacturing Co. have prompted a "cautious" view for the proceeding June quarter.
Hall has left his June 2016 quarter estimates untouched, calling for Apple to ship 51 million iPhones in the three-month span. He believes any weakness could be offset by demand for a new, lower-priced 4-inch iPhone model, which is rumored to be in the works.
Hall is more bullish on Apple's fiscal 2017, however, when the company is expected to offer a next-generation "iPhone 7." He sees iPhone shipments returning to 7 percent growth, reaching 251 million units, while average selling prices are projected to decline 4 percent to $624.
Finally, Hall also reduced his estimates for sales of the Apple Watch to 23.5 million in fiscal year 2016. That's a reduction of 6.5 million from his previous estimate.
Despite the reductions, J.P. Morgan has maintained its $145 December 2016 price target on shares of AAPL.
Though analysts have been reducing estimates, they have largely stood by Apple as a solid investment going forward. But investors are concerned that the current iPhone 6s cycle may not drive continued growth for the smartphone platform.
For its part, Apple has advised investors not to read too much into supply chain data for years. Its complex array of component suppliers can vary based on a number of factors, including pricing, yield rates, availability and more.
Back in 2013, Apple Chief Executive Tim Cook said basing assumptions about sales based on limited data is not recommended.
"Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business," Cook said.
Analyst Rod Hall noted that he still sees AAPL stock as "attractive," and advised investors to use any "weakness" in the stock in early 2016 as an opportunity to increase holdings.
Though J.P Morgan remains "overweight" on Apple, the firm did reduce its March quarter iPhone estimates by 8 percent, or 4.9 million units. Hall now sees Apple shipping 55 million iPhones in the three-month span, which would be a decrease from the 61 million iPhones the company sold in its March 2015 quarter.
Like others who have reduced estimates in recent days, Hall was prompted by Apple suppliers, who have indicated some weakness heading into the coming quarters. Specifically, Hall said that comments by Dialog Semiconductor suggest the March quarter could be weaker than expected, while low numbers from Taiwan Semiconductor Manufacturing Co. have prompted a "cautious" view for the proceeding June quarter.
Hall has left his June 2016 quarter estimates untouched, calling for Apple to ship 51 million iPhones in the three-month span. He believes any weakness could be offset by demand for a new, lower-priced 4-inch iPhone model, which is rumored to be in the works.
Hall is more bullish on Apple's fiscal 2017, however, when the company is expected to offer a next-generation "iPhone 7." He sees iPhone shipments returning to 7 percent growth, reaching 251 million units, while average selling prices are projected to decline 4 percent to $624.
Finally, Hall also reduced his estimates for sales of the Apple Watch to 23.5 million in fiscal year 2016. That's a reduction of 6.5 million from his previous estimate.
Despite the reductions, J.P. Morgan has maintained its $145 December 2016 price target on shares of AAPL.
Though analysts have been reducing estimates, they have largely stood by Apple as a solid investment going forward. But investors are concerned that the current iPhone 6s cycle may not drive continued growth for the smartphone platform.
For its part, Apple has advised investors not to read too much into supply chain data for years. Its complex array of component suppliers can vary based on a number of factors, including pricing, yield rates, availability and more.
Back in 2013, Apple Chief Executive Tim Cook said basing assumptions about sales based on limited data is not recommended.
"Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business," Cook said.
Comments
AAPL is getting hammered today. This is a great time to make a buy in my opinion.
If you want to invest in a company that sells itself to investors, look elsewhere.
I own the iPhone 6S/128 gig and it SCREAMS quality. Apple offers two financing programs that are zero interest and one lets you own the phone outright. The other is essentially a lease with Applecare included that puts a new iPhone in your hand every 12 months. Apple has grabbed other low hanging fruit with streaming music, accessories like headphones, battery cases, etc. Some of the smartly designed and others, not so much. However they have made appropriate efforts to grab that extra growth.
It simply might not be enough. The growth curve for this entire new phase of computing that started in 2007 might be flattening out.
A move by Cook I would prefer to see versus speaking up is to say even less. The company should report revenues in three categories; hardware, software, and services. And profits and gross margins only against the entire company. That's it. No unit numbers, no revenue by product. Force the analysts to focus only on the company's financial performance, which is excellent.
Maybe they are trying to grow even bigger; maybe they are trying to stem reduced consumer demand. Maybe a little bit of both. In any case, they are definitely moving to a different style of management that looks a lot more typical of large companies. This is typical of what happens to big organizations after its driving personality dies. In fact, this reminds me a lot of what happened to the Mongols after Genghis Khan died. Without the driving personality, things inevitably change.
But to be fair, by your own stated numbers at the time of your post, one could say that AAPL is down 33% more than the overall market. Some folks would say that is not good and start flipping their lid.
In the end I am just joking around. The daily swings mean nothing to me. In fact, non of it means anything to me other than I want great products in my hot little hands.
I merely enjoy the histrionics of it all.
Exhibit A: The almighty US$ has appreciated 20-30% against many other currencies. (Not Chinese Yuan and not £)
Apple has increased prices to make up for this strong dollar dilemma. If your European, Canadian, Australian, Japanese or Russian for example, The iPhone 6s probably costs you at least 25% more than the phone you would be replacing originally cost you.
This is a big problem for Apple
Why did Apple slash the price in India for the 5S? This is very disconcerting from a shareholder perspective even though I like the idea of them selling two-year-old technology at cost to get them in the ecosystem...
Something is going on here and my guess is the 6S is not selling as well as we'd hoped outside of the US and China, which is about half of Apple's sales
The only positive here as a shareholder is that as the analysts revise their numbers down, it will hurt less when the numbers finally come out, if shy of targets.
The Irony in my view is that the Chinese economy ( what many were worried about in the last few months) is the best part of this iPhone cycle!
As a shareholder I don't find this price cut disconcerting. I don't know what Apple's margins are in India, but we all know India's population is enormous and most people there are extremely poor. I'd have to be much better informed than I am in order to be qualified to second guess Apple's India business strategy.