Chinese iPhone demand 'recovering' as supply chain stabilizes, analyst says

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Chinese iPhone demand is "recovering" thanks to price cuts, Morgan Stanley analyst Katy Huberty said on Thursday, conflicting with the views of some other analysts.

iPhone XR


"After losing share in 4Q18, [Chinese] iPhone installed base shows market share recovering after price cuts in early 2019," Huberty claimed in a memo. "Combined with stabilizing iPhone supply chain data points, we now see an upward bias to our iPhone estimates in the March quarter."

While Apple saw its install base shrink each month in the December quarter, it was up in both January and February, according to Morgan Stanley's research data.




Huberty cited several influencing factors, including the aforementioned price cuts, specifically to the iPhone XR. Apple is also offering better credit for people trading in old iPhones and discounts up to $250 off the iPhone XS Max.

February was the first month since August that Apple didn't slash its iPhone production builds, Huberty commented, and in fact build estimates are ahead of forecasts, which could mean that sales predictions are conservative. Replacement cycles for iPhone are beginning to match those of PCs, suggesting stabilized demand.

Huberty is maintaining an "overweight" rating on Apple stock with a $197 price target.

The analyst note strikes a decidedly different tone from those of Huberty's peers. Longbow Research, for example, noted that February supplier sales were "abysmal," with 37 out of 42 reporting worse-than-seasonal results. JP Morgan said something similar, specifically that aggregate revenues for tracked suppliers declined 1 percent year-on-year in the first two months of 2019, a drastic change from the 7 percent growth seen in the fourth quarter of 2018. For comparison, the same periods in 2018 and 2017 witnessed growth of 13 percent and 4 percent, respectively.

Comments

  • Reply 1 of 6
    lkrupplkrupp Posts: 7,101member
    Analysts, shmanalysts, who to believe? Business Insider claims it’s getting worse and worse for Apple in China. Is it gloom and doom or unicorns and rainbows? How can so-called professionals look at identical data and come to completely different conclusions? Financial websites are full of contrary conclusions of analysts. For every analyst predicting a stock market Apocalypse there’s another analyst predicting a runaway Bull stock market for the immediate future. Does one believe the conclusion that most closely reflects one’s own bias? AAPL has been on an absolute tear this past week after getting a buy recommendation from Bank of America. Can it be that financial analysts actually read chicken bones to make their calls? Or maybe a Magic Eight Ball?
  • Reply 2 of 6
    DAalsethDAalseth Posts: 631member
    If you ask a bunch of analysts which way the wind is blowing, they will point in every direction. The one that's right will be called a genius.
    gatorguylkruppcanukstormAppleExposedsmiffy31
  • Reply 3 of 6
    DAalsethDAalseth Posts: 631member
    If you ask a bunch of analysts which way the wind is blowing, they will point in every direction. The one that's right will be called a genius.
  • Reply 4 of 6
    chasmchasm Posts: 1,545member
    Yes, this report follows on the heels of at least two reports that say pretty much the exact opposite. I don't think anyone's got a great picture on this yet except Apple themselves at the moment. The sites that are traditional down on Apple (coughBUSINESS INSIDERcoughFORBEScough) are predicting dooooooom™, while Ms. Huberty (who is generally upbeat on Apple but doesn't have a great track record of prediction either) says things are recovering.

    My bet is that things will be about the same or slightly better than last quarter viz Greater China sales, but full recovery will take a while and is VERY dependent on the US and China working out a new deal (which seems likely, but we live in unpredictable times at the moment).

    Importantly, Apple's overall health and likely growth will probably continue in 2019, albeit not at the rate we saw in recent years. OTOH, there's some new services, software, and products coming at some point, so that my help Apple minimize China's weakness until things get better there.
  • Reply 6 of 6
    AppleExposedAppleExposed Posts: 950unconfirmed, member
    Yesterday Apple was doomed in China, today it's doing well.

    I would lean toward this report as online retailers reported a massive spike in sales after the price cut.
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