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Looks like Apple is only going to sell 14M instead of 15M. Surely not 25% cut, but a sizable cut indeed. As Goldman Sachs points out, it likely has nothing to do with demand, more to do with building up for the forthcoming holiday rush.
On the plus side, a 520 target price and a 'conviction buy' rating from a global thought leader is about as good as it gets. Time to buy.
Earnings are going to be very interesting October 18th. I have to wonder how many iPhones they'll actually have sold after tempering the enthusiasm after the previous earnings citing a "product transition". They set the expectations much lower for this quarter after having a hall-of-fame type quarter preceding. The 16 month old iPhone is still the best selling phone. That's a little bit crazy as it's well under-powered by todays standard. Having said that, it's still a faster/better user experience then the competition so I'm not too surprised. I have to imagine the margins are ridiculously high right now as the components are all pretty outdated now. That would be sweet if Apple is making 500-550 per phone that they sell to carriers for 650.
Claims that surfaced on Monday suggesting Apple had cut iPad 2 orders for the fourth quarter have reportedly been confirmed. JP Morgan analysts Mark Moskowitz and Gokul Hariharan wrote in a note to investors on Monday that Apple had reduced its fourth-quarter iPad 2 orders from 17 million to 13 million units, suggesting that demand for Apple’s market-leading iPad might finally be waning. Some speculated that a portion of iPad production may have moved to Foxconn’s new factory in Brazil while others suggested that the report was not accurate, and JP Morgan’s Moskowitz would later issue a second note backtracking on the firm’s earlier statements. But should he have been so quick to fold? Read on for more.
Goldman Sachs analysts Liang-chun Lin and Bill Shope each claim to have independently confirmed the fourth-quarter production cuts for Apple’s slate. Channel checks performed separately by each of the analysts indicate that iPad shipments in the fourth quarter are now expected to fall between 13 million and 14 million units, below the firm’s earlier estimate of 15.4 million. ”Overall, the data points suggest some slack iPad supply, at both the production and component level,” Lin wrote.
The production cuts suggest a possible decrease in end user demand, however Goldman’s Shope believes that is an unlikely scenario. Instead, the analyst thinks Apple likely increased orders dramatically ahead of the holiday season and is now dropping production down to normal levels. Shope also suggested that Apple may instead be controlling iPad 2 manufacturing very closely in preparation for an iPad 3 launch in early 2012. The firm still sees Apple shipping between 28 million and 30 million iPads in the second half of 2011.
“We believe a demand-centric bear case on Apple’s stock will quickly disintegrate in the face of multiple October product catalysts (next gen iPhone, iOS5, and iCloud), remarkably strong September quarter results, and what we expect to be solid iPad, Mac and iPhone momentum in the December quarter,” Shope wrote in his note. Goldman Sachs reiterated its $520 price target on Apple stock with a Conviction Buy rating.
Goldman Sachs analysts Liang-chun Lin and Bill Shope each claim to have independently confirmed the fourth-quarter production cuts for Apple’s slate. Channel checks performed separately by each of the analysts indicate that iPad shipments in the fourth quarter are now expected to fall between 13 million and 14 million units, below the firm’s earlier estimate of 15.4 million. ”Overall, the data points suggest some slack iPad supply, at both the production and component level,” Lin wrote.
The production cuts suggest a possible decrease in end user demand, however Goldman’s Shope believes that is an unlikely scenario. Instead, the analyst thinks Apple likely increased orders dramatically ahead of the holiday season and is now dropping production down to normal levels. Shope also suggested that Apple may instead be controlling iPad 2 manufacturing very closely in preparation for an iPad 3 launch in early 2012. The firm still sees Apple shipping between 28 million and 30 million iPads in the second half of 2011.
“We believe a demand-centric bear case on Apple’s stock will quickly disintegrate in the face of multiple October product catalysts (next gen iPhone, iOS5, and iCloud), remarkably strong September quarter results, and what we expect to be solid iPad, Mac and iPhone momentum in the December quarter,” Shope wrote in his note. Goldman Sachs reiterated its $520 price target on Apple stock with a Conviction Buy rating.
Earnings are going to be very interesting October 18th. I have to wonder how many iPhones they'll actually have sold after tempering the enthusiasm after the previous earnings citing a "product transition". They set the expectations much lower for this quarter after having a hall-of-fame type quarter preceding. The 16 month old iPhone is still the best selling phone. That's a little bit crazy as it's well under-powered by todays standard. Having said that, it's still a faster/better user experience then the competition so I'm not too surprised. I have to imagine the margins are ridiculously high right now as the components are all pretty outdated now. That would be sweet if Apple is making 500-550 per phone that they sell to carriers for 650.
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