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  • squeezetracker squeezetracker Jan 14, 2013 2:06 PM Flag

    Barron's Piece just out: AAPL: Bulls Rush to Defend Against WSJ, Nikkei iPhone Reports

    January 14, 2013, 12:55 P.M. ET
    AAPL: Bulls Rush to Defend Against WSJ, Nikkei iPhone Reports
    By Tiernan Ray

    Shares of Apple (AAPL) are down $17.45, or 3%, at $502.85, after slipping as low as $498.51, following reports yesterday the company has cut component orders for the iPhone 5 amidst weaker-than-expected demand for the device.

    The Wall Street Journal’s Juro Osawa late yesterday reported that orders of screens for the iPhone 5 “for the January-March quarter, for example, have dropped to roughly half of what the company had previously planned to order,” citing multiple unnamed sources.

    There was also a report in Japan’s Nikkei News Service, which specifically mentioned Japan Display, LG Display (LPL), and Sharp reducing supply of LCD panels for the phone “significantly,” according to a summary provided by TheFlyontheWall. (Nikkei requires a subscription to read articles.)

    The cuts, if true, and if they have anything to do with production, would appear to affect the fiscal Q2 ending in March, versus the fiscal Q1 that ended last month.

    The bulls are out in force this morning, with many declaring the report “old news” following a spate of rumors in December arguing demand was off and orders were being cut.

    UBS’s Steve Milunovich this morning reiterates a Buy rating and a $700 price target, writing that “The article says Apple notified suppliers of the cut last month, which is when we and most of the Street reported it.”

    “Consequently, it appears this is old news—our analysts indicate no changes since.”

    Milunovich still expects iPhone units of 45 million last quarter, 41 million this quarter, 36 million in the June quarter, and 33 million in the September quarter.

    J.P. Morgan‘s Mark Moskowitz likewise reiterates an Overweight rating and a $770 price target, writing that “In our view, this is just more noise around the supply chain as the order cuts have been discussed in media reports over the last few weeks and a topic we had discussed previously on December 19.”

    Moskowitz reiterates an expectation for 48 million iPhones having been sold last quarter, and 45 million this quarter, adding “Even if we assume that Apple has cut iPhone 5 orders in half from the 65M that the Nikkei reported, it implies upside to our current estimates.”

    Moskowitz goes so far as to write that order cuts may be a result of improving supply:

    We believe the bigger message related to any potential order cuts could be that iPhone 5
    manufacturing yields and thereby gross margin are on the rebound. In our view, the potential order cuts are a direct result of manufacturing yields improving following the fast-and-furious product roll-outs of the iPhone 5 as well as new iPads and Macs. We had written previously that Apple had to absorb cost overage (due to poor yields) in the building of iPhone 5 and iPad mini. In our view, recent order cuts could suggest that the manufacturing yields are improving on the iPhone 5, and as a result, this could be another reason that Apple pulled back on excess orders of certain components.

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