Market Overview

Apple Analyst: Inventory Glut In iPhone Camera Module Supply Chain Is Over

Apple Analyst: Inventory Glut In iPhone Camera Module Supply Chain Is Over

Cascend Securities' checks within Apple Inc. (NASDAQ: AAPL)'s supply chain point to the end of an inventory glut, and the firm said this is a positive for the iPhone maker and component suppliers.

The Analyst

Cascend Securities maintained a Buy rating on Apple with an unchanged $240 price target.

The Thesis

Cascend Securities' checks into Apple's supply chain indicate a rebound in sentiment, the sell-side firm said Tuesday. 

April was the second consecutive month of year-over-year growth, which marks a turnaround from the prior three months of declines, Cascend said.

The three months of decline were not as difficult as prior cycles, as orders were cut in early November, but actual revenue didn't start dropping until December, the sell-side firm said. 

The following are additional takeaways from Cascend Securities' research:

  • December through February were "weak" months in a manner more consistent with the first quarter of 2016 than what Cascend said was an "unnecessary iPhone X analyst panic" in the first quarter of 2018.
  • Second-quarter 2019 activity is improving due to price cuts.
  • Component makers see a slowdown "subsiding in other chatter from the iPhone supply chain."
  • Apple's suppliers are validating media reports the company is looking to move some production outside of China.
  • Apple's assembly partners already have facilities in Taiwan and are moving to Vietnam to take advantage of low labor costs and young workers.
  • India remains a "megamarket untapped by [the} iPhone."
  • A partial move out of China is "prudent," but "a decade too late."
  • A partial move out of China could prove to be less costly than "naysayers believe."

Price Action

Apple shares were down 1.45% at $195.70 at the time of publication Tuesday. 

Related Links:

Wedbush: Substantial Shift In iPhone Production Would Take 2 Years

Apple Analyst: Shift Away From Chinese Production Would Be 'Gargantuan Endeavor'

Photo by Daniel Lu/Wikimedia

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