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Apple (AAPL) On Track to "Make in India" by April 2017?

Zacks Equity Research

Reportedly, Apple AAPL will set up its iPhone assembly line in India by the end of Apr 2017. The iPhone-maker will set up its first manufacturing unit in Bangalore, Karnataka and has teamed up with Wistron Corp. from Taiwan to take care of the assembly of the iPhones.  

Why India?

The decision comes at a time when the smartphone market is witnessing a slowdown in other parts of the world except India, which remains the fastest growing market in the segment.

With Narendra Modi at the helm, the tagline of “Make in India” is fast catching up with global manufacturing majors. The Apple deal could open the doors for other global players to set up their manufacturing units in the country.

However, China still remains a major contender in the manufacturing space.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus | Apple Inc. Quote

What Does This Mean for Apple?

Currently, the smartphone scene in India is being dominated by Samsung Electronics Co. and other comparatively cheap Chinese brands such as Oppo.

As per a Counterpoint Research report, in 2016, Apple shipped 2.5 million iPhones to India. However, the company ranked 10th in the top smartphone vendors list for the December quarter. An estimated 750 million smartphones are projected to be sold in the country by 2020, where Apple currently has only a 2% market share.

As per capita income in the country is on the rise, this trend is likely to witness a major shift with people turning to premium-priced phones such as the iPhone in the future.

Moreover, Apple’s strategy to remain a fabless firm by handing over capital intensive processes such as manufacturing, factory building and staff hiring to third parties (in this case Wistron Corp.) are expected to positively impact the company’s bottom-line going ahead.

Stock Performance Overview

Shares of Apple have performed more or less in line with the broader Zacks Computer - Mini Computers industry over the last one year. While the industry gained 33.1%, the stock gained 32.7%

The in-line performance of the stock could be primarily attributed to good growth in its services revenues, especially with regard to Apple Music and App Store. However, as mentioned above, the company is seeing sluggish demand for its flagship offering, the iPhone in major markets worldwide. Also, intensifying competition and macroeconomic headwinds remain concerns for the company.

Zacks Rank & Key Picks

At present, Apple carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space include Acxiom Corporation ACXM, Aspen Technology, Inc. AZPN and Inphi Corporation IPHI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the consensus estimate for Acxiom’s current year has remained stable at 29 cents over the last 60 days.

Similarly, the consensus estimate for Aspen’s current year has improved to $1.67 from $1.62 over the last seven days.

Also, the consensus estimate for Inphi’s current year has remained stable at 85 cents over the last 90 days.

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