Stocks have lagged behind the broader market in recent weeks. One analyst says it offers a good buying opportunity.
Shares of the tech giant have fallen 16% since hitting a closing high of $ 142.95 on January 26. By comparison, the Nasdaq Composite is down less than 3% and the S&P 500 is up 2% over the same period. Shares of Apple fell 1.8% in late Friday trading to $ 119.72.
The company hasn’t actually said anything material in recent weeks, but there has been considerable speculation that there could be a decline in demand for the iPhone. Nikkei Asia news service reported earlier this week that Apple recently cut its production plans for the first half of the year by 20%, due in large part to weak demand for the iPhone 12 mini, the low-end version of the iPhone line with 5G capability. announced last fall. Apple has not commented on the Nikkei report and did not respond to a Barron Request for comment on this earlier this week.
In a research note on Friday,
Hardware analyst Katy Huberty repeated her overweight rating and $ 164 price target on Apple stock, stating that the recent sell-off is a buying opportunity and that recent conversations about developments in Taiwan’s supply chain are more noise than substance.
“Over the past two weeks, we have seen reports of [other analysts] that Apple is in the process of cutting back on iPhone production, ”he writes. “These reports have contributed to Apple’s recent underperformance and investors are wondering what we are hearing from the supply chain and how it affects our view of iPhone shipments this year.”
Huberty’s opinion is that the reports say nothing about the fundamental perspective. Checks by your colleagues in Asia reveal that manufacturing orders for iPhone 12 models, in addition to the mini, and for legacy iPhone 11 models, are increasing, not decreasing.
The analyst writes that monthly sales reports from the company’s Taiwanese component suppliers accelerated in February for the fifth consecutive month. “At a high level, these data points give a positive reading for sustained strong demand for the iPhone,” he says.
Additionally, he notes that Apple continues to see strong demand for the iPhone in China, with sales outpacing those of domestic smartphone vendors. She estimates that based on government data on mobile phone sales, Apple’s iPhone sales in China increased 157% in January on a year-over-year basis and 314% in February. Third-party data shows that Apple’s share of the installed base of smartphones reached 20.4% last month, an increase of 85 basis points year-over-year, and marks the sixth consecutive month with the highest market share, it adds. .
While Huberty admits there is growing evidence of soft demand for the iPhone 12 mini, he still generally believes that the consensus estimates for iPhone sales for fiscal 2021 are too low.
“We have heard anecdotally from our semiconductor colleagues that Apple’s memory purchases remain strong, which would go against the narrative of major iPhone cuts,” he writes. “Putting all of this together, we believe that the news of the big cuts in iPhone production is likely to be more supply chain noise than material concern.”
Write to Eric J. Savitz at [email protected]