Apple Alert: JPMorgan Sees Early Signs Of Weakness For iPhone 6S Cycle
- Apple Inc. (NASDAQ: AAPL) shares have been volatile in 2015 and are up 3 percent year-to-date, while shares of Catcher Technology Co., Ltd. (TPE: 2474) are up 18 percent.
- JP Morgan’s Narci Chang reiterated a cautious view on Apple’s supply chain and maintained an Overweight stance on selected market-share gainers like Catcher.
- While most of the Apply supply chain players showed m/m sales decline in November, some players recorded market share gains, Chang stated.
Analyst Narci Chang mentioned that Apple’s November sales indicate early weakness of the iPhone 6S cycle. While most of the Apple supply chain names showed a significant m/m downtrends in November, some companies, like Hon Hai, Radiant, Catcher and GIS, managed to deliver positive m/m numbers due to support from the iPad Pro and market share gains.
“The weak November numbers reaffirm our cautious call on the Apple supply chain back to October. Our previous research suggests 75-80mn units for iPhone build plan in 4Q15. Now we believe it is more likely towards the low end of the range (75-77mn),” Chang wrote.
Although Street expectations for Apple’s supply chain have been lowered, Chang sees downside risk to the 1Q16 consensus number of 50-55 million units. He believes that 45-50 million is a more realistic target.
“While there is no visibility for 2Q16 right now, we think it is more likely to trend down QoQ and current Street expectations of flat to up QoQ seasonality are too optimistic,” the JP Morgan report stated.
While all eyes are on the potential launch of the iPhone 6c, Chang believes the new model will just be a refreshed version of iPhone 5S and will not change the competitive landscape and iPhone build numbers.
The analyst expects meaningful share price corrections for the Apple supply chain names in 1Q16, given reduced Street expectations and disappointing Apple sell-through numbers. Catcher is expected to deliver a CAGR of around 24 percent over 2015-2017.
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