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Morgan Stanley says the recent fall in Apple stock is nothing but an opportunity to increase the stock.
Justin Sullivan / Getty Images
Apple
inventory has lagged the broader market in recent weeks. An analyst says it offers a good buying opportunity.
Shares of the technology giant are down 16% since reaching a closing peak of $ 142.95 on January 26. In comparison, the Nasdaq Composite is down less than 3% and the S&P 500 is up 2% over the same period. Apple stock fell 1.8% to $ 119.72 last Friday.
The company hasn’t actually said anything substantial in recent weeks, but there has been much speculation that demand for the iPhone could decline. The news service Nikkei Asia reported earlier this week that Apple recently cut its production plans for the first half of the year by 20%, largely due to weak demand for the iPhone 12 mini, the low-end version of the 5G-compatible iPhone series. . announced last fall. Apple has not commented on the Nikkei report, nor responded to one Barron’s request for comment earlier this week.
In a research note Friday,
Morgan Stanley
hardware analyst Katy Huberty reiterated her assessment of overweight and a target price of $ 164 for Apple stock, claiming that the recent sell-off is a buy opportunity, and that the recent chatter about Taiwan’s supply chain developments is more noise than substantive.
“In the past two weeks we have seen reports of [other analysts] that Apple is in the process of reducing iPhone production, ”she writes. “These reports have contributed to Apple’s recent underperformance and investors are asking what we hear from the supply chain and how it affects our view of iPhone shipments this year.”
Huberty believes the reports say nothing about the fundamental outlook. Audits by her colleagues in Asia show that build orders for iPhone 12 models – apart from the mini – and for older iPhone 11 models are being increased, not decreased.
The analyst writes that the monthly sales reports of the company’s Taiwanese component suppliers accelerated for the fifth consecutive month in February. “At a high level, these data points are positive for the continued strong demand for iPhone,” she said.
She also notes that Apple is still seeing strong demand for iPhones in China, with sales outperforming domestic smartphone vendors. She estimates that, based on government data on cell phone sales, Apple’s iPhone sales in China were up 157% year-on-year in January and 314% in February. Third-party data shows that Apple’s share of smartphones installed last month was 20.4%, up 85 basis points year-on-year, marking the sixth straight month with increased market share, she adds.
Although Huberty admits there is growing evidence of soft demand for the iPhone 12 mini, she still generally feels that consensus estimates for FY2021 iPhone sales are too low.
“We have heard anecdotally from our semiconductor colleagues that Apple’s memory purchases remain robust, which would run counter to the story of significant cuts to the iPhone,” she writes. “All things considered, we believe the news of major cuts in iPhone production is likely to be more noise in the supply chain than a material concern.”
Write to Eric J. Savitz at [email protected]