JP Morgan Modeling For Increased Q4 iPhone Production Plan

• Apple Inc. AAPL shares are down 12 percent since April 13, after having plummeted from above $132 in mid-July to $103 in mid-August.
• JP Morgan’s Rod Hall has an Overweight rating on the company.
• Semiconductor analyst Narci Chang said that robust demand has boosted Apple’s 4Q15 iPhone production plans.

Supply chain visits indicate that Apple has increased its iPhone production plan for 4Q15 from about 70-75 million units to 75-80 million units. This represents 5-10 percent Y/Y growth, as compared to market expectation of a flat Y/Y.

Analyst Narci Chang believes this reflects the high inaugural weekend presale number reported by the company, which was 13 million units, as compared to 10 million units last year. He added, however, that the 1Q16 figure of 45-50 million units appears lower than what most investors expected.

Shares of companies in Apple’s supply chain have been under pressure since mid-2015 on account of falling expectations for the iPhone 6S/6S Plus replacement cycle. The raised production plans indicate robust “pull-in demand,” with China’s entry into the initial launch markets for new iPhones, the JP Morgan report stated.

Chang said, however, that the reduced 1Q16 number implies more sluggish sell-through demand.

“The weakening Y/Y momentum echoes our view to stay cautious on Apple supply chain names with the exception of market share gainers and spec upgraders. We believe Y/Y comps will look increasingly tough for most Apple supply chain players in 1H16 but may improve in 2H16,” Chang wrote.