JP Morgan adds to Apple supply chain worries, cuts early 2016 iPhone estimates

Posted:
in AAPL Investors edited December 2015
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.

Foxconn


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.
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Comments

  • Reply 1 of 63
    sog35 said:
    This is the 10th Analyist that says supply chain is proof that iPhone sales will be weak.

    Why isn't Cook doing anything?

    Every day some other Anaysist comes out with the same BULLSHIT and the stock sheds another $6,000,000,000-$18,000,000,000. 
    The stock has lost $140,000,000,000 in a few months because of these rumors.

    Yet Cook does NOTHING!
    Maybe he is not doing "nothing", maybe he is happy buying shares like crazy so that the buyback-programm will be finished 1 year earlier or will be enlarged a third time. As a long-term investor I remain confident in Apples strategy and look forward to a larger dividend next year. Why going crazy about a sinking stock when there is no intend so sell it?
    edited December 2015 tmayradarthekatjony0
  • Reply 2 of 63
    Clearly this is just an echo chamber at this point. Once again using the flawed method of reading into the supply chain. There is nothing Apple can do about Wall Street reading in to supply chain noise. Tim Cook has already said on conference calls that it's nonsense but he can't stop Wall Street obsessing over it.
    radster360nolamacguychiajony0
  • Reply 3 of 63
    Here we go again.

    AAPL is getting hammered today. This is a great time to make a buy in my opinion.
  • Reply 4 of 63
    sog35 said:
    Yet Cook does NOTHING!
    Apple sells products to customers, and Cook orchestrates that.
    If you want to invest in a company that sells itself to investors, look elsewhere.
    tmayradarthekatdws-2suddenly newtonradster360nolamacguybrucemcjony0
  • Reply 5 of 63
    eightzeroeightzero Posts: 2,258member
    sog35 said:
    This is the 10th Analyist that says supply chain is proof that iPhone sales will be weak.

    Why isn't Cook doing anything?

    Every day some other Anaysist comes out with the same BULLSHIT and the stock sheds another $6,000,000,000-$18,000,000,000. 
    The stock has lost $140,000,000,000 in a few months because of these rumors.

    Yet Cook does NOTHING!
    Silence is not nothing. Meanwhile, they plan a massive stock buyback at low prices. 
    edited December 2015 flaneur
  • Reply 6 of 63
    trumptmantrumptman Posts: 16,452member
    sog35 said:
    This is the 10th Analyist that says supply chain is proof that iPhone sales will be weak.

    Why isn't Cook doing anything?

    Every day some other Anaysist comes out with the same BULLSHIT and the stock sheds another $6,000,000,000-$18,000,000,000. 
    The stock has lost $140,000,000,000 in a few months because of these rumors.

    Yet Cook does NOTHING!
    Cook and Apple have done plenty. There could simply be a change in the market itself and while Apple may come out better than all others, they may still not be able to grow at the extraordinary rate they have done so in the past.

    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. 
    edited December 2015
  • Reply 7 of 63
    radarthekatradarthekat Posts: 2,973moderator
    sog35 said:
    This is the 10th Analyist that says supply chain is proof that iPhone sales will be weak.

    Why isn't Cook doing anything?

    Every day some other Anaysist comes out with the same BULLSHIT and the stock sheds another $6,000,000,000-$18,000,000,000. 
    The stock has lost $140,000,000,000 in a few months because of these rumors.

    Yet Cook does NOTHING!
    He's not exactly doing nothing.  He's overseeing the repurchase of a boatload of shares.  122 million in the summer quarter, and likely as many more by the time this quarter ends.  

    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.
    edited December 2015 neil andersonStockJerkpalomineyojimbo007brucemc
  • Reply 8 of 63
    jfc1138jfc1138 Posts: 3,090member
    techlover said:
    Here we go again.

    AAPL is getting hammered today. This is a great time to make a buy in my opinion.
    "hammered"? It's down a little over 1% while the overall DOW is off 0.65. and NASDAQ is down 0.59
    nolamacguy
  • Reply 9 of 63
    radarthekatradarthekat Posts: 2,973moderator
    A potential reason analysts get their supply chain checks wrong at the beginning of an S cycle.

    Analysts may be failing to appreciate the implication that in the S years Apple is producing most of its iPhones on a common platform (4 out of 5 iPhones in the line-up this year are on the 6 platform).  After a year of establishing a supply chain on a new platform (the iPhone 6 platform in this case), it would make sense that the company would somewhat diversify that supply chain in order to ensure parts flow for the second year, due to the fact that an overall higher portion of its iPhone inventory is reliant upon that single platform and its suppliers.  

    Also, there's likely a natural shift by more of Apple's suppliers toward support of Apple's  latest platform.  This leapfrog is probably a pattern that repeats with each iPhone cycle.  In the initial year of a new model, one or two suppliers win the bid to supply a given part for the new model, while other suppliers continue supplying parts for the still-strong-selling outgoing models.  Then, as the S year comes around and Apple needs more of the parts common across the new platform, some of the suppliers who were left behind come aboard, taking away some of the business from those suppliers who previously had 100% of the new-platform business.  If you're doing your supply-chain checks only against a company that initially got a contract to supply the 6, and that company is now sharing the combined orders for the 6 and 6S with other companies, it would appear that Apple is just ordering fewer components overall.  But that would be wrong, and naive
    edited December 2015 palominezoetmbjony0badmonk
  • Reply 10 of 63
    gatorguygatorguy Posts: 20,068member
    The analysts fail to appreciate that in the S years, with the company producing most of its iPhones on a common platform (4 out of 5 iPhones in the line-up this year are on the 6 platform).  After a year of establishing a supply chain on a new platform, it would make sense that the company would somewhat diversify that supply chain in order to ensure parts flow for the second year, due to the fact that an overall higher portion of its iPhone inventory is reliant upon that single platform and its suppliers.  Also, there's likely a natural shift by more of Apple's suppliers toward support of its latest platform.  This leapfrog is probably a pattern that repeats with each iPhone cycle.  In the initial year of a new model, one supplier wins the bid to supply parts for the new model, while other remain happy to continue supplying parts for the still-strong-selling outgoing models.  Then, as the S year comes around and Apple needs more of the parts common across the new platform, some of the suppliers who were left behind come aboard, taking away some of the business from those suppliers who might have had 100% of the new-platform business.  If you're doing your supply-chain checks against a company that initially got a contract to supply the 6, then that company any now be sharing the combined orders for the 6 and 6S with other companies.  Unless you knew where part of that business was shifted to, it would appear that Apple is just ordering fewer components overall.
    I wonder if the analysts who've followed Apple for several years know that. 
  • Reply 11 of 63
    dws-2dws-2 Posts: 225member
    I have no idea what's going on, but it is very clear that Apple is making significant changes. They have started selling almost all their products (except iPhones) at larger discounts than normal to get big promotions from big box stores. They have started to advertise in their own apps to push iPhones. They are reshuffling their management.

    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.
  • Reply 12 of 63
    ac1234ac1234 Posts: 138member
    eightzero said:
    sog35 said:
    This is the 10th Analyist that says supply chain is proof that iPhone sales will be weak.

    Why the fuc isn't Cook doing anything?

    Every day some other Anaysist comes out with the same BULLSHIT and the stock sheds another $6,000,000,000-$18,000,000,000. 
    The stock has lost $140,000,000,000 in a few months because of this BULLSHIT rumors.

    Yet Cook does NOTHING!
    Silence is not nothing. Meanwhile, they plan a massive stock buyback at low prices. 
    To accomplish what ????  Over $100,000,000,000 of shareholder value has been wasted on this buyback scheme.
  • Reply 13 of 63
    jfc1138 said:
    techlover said:
    Here we go again.

    AAPL is getting hammered today. This is a great time to make a buy in my opinion.
    "hammered"? It's down a little over 1% while the overall DOW is off 0.65. and NASDAQ is down 0.59
    I was being hyperbolic for sure.

    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.
  • Reply 14 of 63
    jungmarkjungmark Posts: 6,649member
    All these analysts downgrading the expectations makes me wonder how they made up their initial guesses in the first place. 
    palomine
  • Reply 15 of 63
    The analysts fail to appreciate that in the S years Apple is producing most of its iPhones on a common platform (4 out of 5 iPhones in the line-up this year are on the 6 platform).  After a year of establishing a supply chain on a new platform (the iPhone 6 platform), it would make sense that the company would somewhat diversify that supply chain in order to ensure parts flow for the second year, due to the fact that an overall higher portion of its iPhone inventory is reliant upon that single platform and its suppliers.  

    Also, there's likely a natural shift by more of Apple's suppliers toward support of its latest platform.  This leapfrog is probably a pattern that repeats with each iPhone cycle.  In the initial year of a new model, one or two supplier wins the bid to supply a given part for the new model, while other suppliers remain happy to continue supplying parts for the still-strong-selling outgoing models.  Then, as the S year comes around and Apple needs more of the parts common across the new platform, some of the suppliers who were left behind come aboard, taking away some of the business from those suppliers who previously had 100% of the new-platform business.  If you're doing your supply-chain checks only against a company that initially got a contract to supply the 6, and that company is now sharing the combined orders for the 6 and 6S with other companies, it would appear that Apple is just ordering fewer components overall.  But that would be wrong, and naive.
    This is probably EXACTLY what is going on here.
  • Reply 16 of 63
    sog35 said:
    This is the 10th Analyist that says supply chain is proof that iPhone sales will be weak.

    Why isn't Cook doing anything?

    Every day some other Anaysist comes out with the same BULLSHIT and the stock sheds another $6,000,000,000-$18,000,000,000. 
    The stock has lost $140,000,000,000 in a few months because of these rumors.

    Yet Cook does NOTHING!
    I believe Apple is indeed falling shorter than they'd like this time, maybe these Rumors are founded somewhat. 
     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!
    edited December 2015
  • Reply 17 of 63
    As I've said before I can't wait until Apple is no longer iPhone, Inc. Sure Alphabet is Advertising, Inc. but Wall Street considers them a monopoly and is smitten by all their moonshots and pie in the sky stuff. Apple chooses to keep all of that stuff secret so Wall Street has nothing other than how many iPhones did Apple sell.
  • Reply 18 of 63
    *yawn*.... didn't this happen during 5S days, and 4S days? and weren't they ALL wrong the last few times too?
    nolamacguySpamSandwich
  • Reply 19 of 63
    dws-2 said:
    They have started selling almost all their products (except iPhones) at larger discounts than normal to get big promotions from big box stores. 
    Are you sure this is true?  My understanding is that the big box stores are the ones offering discount on Apple products and it's not Apple who's lower their prices (and margins and profits).  The reason they do this is to get people in their store.  In other words, because Apple products are so popular it's natural to use them as loss leaders.  I hope I'm not guilty of wishful thinking, so I hope you're mistaken, but I don't know for sure one way or the other.
    StockJerkpalominenolamacguySpamSandwich
  • Reply 20 of 63

    StockJerk said:

     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...


    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.
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