SIG analysts are raising estimates on Apple Inc. (NASDAQ:AAPL) after completing their post-Thanksgiving checks on Apple Inc. (NASDAQ:AAPL)’s supply chain. Most notable from their checks are a significant production shift from iPhone 5C to 5S. While the total number of iPhones in the December quarter are in-line with analysts’ expectations, the production changes imply a much stronger mix than originally anticipated, benefiting both revenue and margins.
Apple March Qtr
March quarter production is also ahead of analysts’ prior expectations, as Apple Inc. (NASDAQ:AAPL) likely builds some inventory for iPhone 5S, and ramps production of the China Mobile iPhone. They expect iPhone build plans to remain controversial over the next few weeks as the analyst community balances the downside of iPhone 5C with the upside on the 5S. But after looking at the full production picture they feel good about the outcome, and feel comfortable with estimates and the stock into the January report.
In SIG’s Dec. 11 industry note, analysts noted incrementally weaker iPhone 5C builds. However, their checks at that time were preliminary and did not reflect Black Friday sales data yet, and that they expected the production forecast to be revised in mid-December. Following analysts’ most recent checks, they believe December iPhone builds are running in the 52-54 mln range, essentially in-line with their October 8 checks but better than SIG’s read in early December.
Revenue, GM Implications for Apple in CQ4
Analysts’ checks indicate the mix has indeed shifted disproportionately to iPhone 5S, with production of 5S running nearly 4x that of 5C. Importantly, SIG analysts note there wasn’t a fall off in demand for iPhone 5S after the initial strength of the launch. This shift should have beneficial revenue and gross margin implications for Apple Inc. (NASDAQ:AAPL) in C4Q.