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Apple ‘doomsday’ deemed nonsense

iPhone 5 Demand

Reports of Apple’s (AAPL) death are greatly exaggerated. So says Topeka Capital Markets analyst Brian White, who wants investors to “rise above the iPhone 5 cuts and just buy Apple” stock. White acknowledged in a note to clients on Tuesday that there have been cuts made recently in Apple’s supply chain, but he says the Street has the reasoning all wrong. iPhone 5 demand isn’t cooling, the analyst contends — instead, some Apple partners are having trouble building enough components and Apple has been forced to cut orders from other suppliers as a result. Put plainly, White says, “we believe the doomsday scenarios painted over the past week are inaccurate.”

First Cuts for iPhone 5 Should Not be a Surprise. Our checks indicate that cuts have occurred in the iPhone 5 supply chain at certain suppliers beginning a couple of weeks ago for the month of December; however, no cuts occurred during the months of October or November. Additionally, we did not find changes for the March quarter. As such, we remain comfortable with our iPhone 5 and iPhone 4S forecasts for the December and March quarters, which appear to be conservative. Also, given our research in recent weeks, it is tough for us to ignore the resiliency of iPhone 4S demand as consumers flock to these discounts. During our October trip to Asia, we indicated that yield issues for certain components used in the iPhone 5 would result in supply constraints, which we believe is now driving Apple to cut orders at certain supply chain vendors for the first time in the December quarter. Actually, we are a bit surprised that these cuts didn’t occur sooner.

He continued, noting that yield issues have also slowed the iPhone 5’s global rollout as compared to the iPhone 4S.

For example, the iPhone 4S was already in 70 countries in the first 63 days of the launch last year versus our estimate of 47 countries for the iPhone 5 over a similar time frame this year. With the addition of over 34 countries for the iPhone 5 by December 14 and another 20 countries to be added on December 21, Apple is on track to reach 101 countries during the first 91 days of the iPhone 5, better than the 92 countries for the iPhone 4S over a similar time frame. That said, the slower pace of the ramp in the initial two months is driving lower volumes versus Apple’s original expectations (but not our expectations), which is in-line with our thoughts during our October Asia trip.

White maintained his Buy rating on Apple shares with a 12-month price target of $1,111. Apple was trading up more than 1% during Tuesday morning’s session.[bgr-post-bug]

Zach Epstein

Zach Epstein has worked in and around ICT for more than 15 years, first in marketing and business development with two private telcos, then as a writer and editor covering business news, consumer electronics and telecommunications. Zach’s work has been quoted by countless top news publications in the US and around the world. He was also recently named one of the world's top-10 “power mobile influencers” by Forbes, as well as one of Inc. Magazine's top-30 Internet of Things experts.

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