Apple suppliers had a better than expected June, which likely means good things for Apple itself. However, analysts continue to look ahead to the company’s fall product launches. Cantor Fitzgerald analyst Brian White released the latest results from his Apple (NASDAQ:AAPL) Barometer in a report dated today.
Apple suppliers beat in June
The analyst said that as of this morning, early June sales results for the suppliers in his Apple Barometer show better than historical seasonality. He said so far 97% of the sales to Apple from the companies in his barometer are in. The barometer saw about a 0% to 1% month over month increase in sales. That’s better than the 3% average decline over the last nine years. Included in the Apple Barometer are the top suppliers in Taiwan that generate large percentages of sales from Apple. As a result of June’s strong results from Taiwanese suppliers, their shares edged higher today.
Now that the June sales results are in, White says the full second quarter was better than seasonal for Apple suppliers based in Taiwan. He estimates about a 20% to 21% quarter over quarter increase in sales for his Apple Barometer. That’s significantly higher than the average of 10% recorded over the last nine years.
According to White, June has been a key transition quarter for Apple over the last few years. He says although he is encouraged by the June results from the Apple Barometer, he’s more focused on the company’s ability to execute on this fall’s anticipated product launches, as well as consumer demand for them.
Apple’s “Fab Fall” launches
White continues to call this year Apple’s “Year of Innovation.” He emphasizes the importance of this fall’s product launches, referring to as “Fab Fall.” He notes that Apple has received a lot of criticism about two main things over the course of the last 18 months. First, he says the lack of a larger iPhone has been a point of concern for investors. Competitors have continued to roll out smartphones with a display that is greater than 5 inches in size, but Apple has yet to do this, as the latest model still has only a 4-inch display. Second, he said investors have been concerned about the lack of innovation.
The analyst believes both of these worries have had a negative impact on the perception and valuation of Apple. However, he thinks this upcoming “Fab Fall” will solve both of those worries. Included in his expectations are the iPhone 6, which is expected to be larger than the 5S. Apple is believed to be working on a model with a 4.7-inch display and a second with a 5.5-inch display. He also expects the rumored iWatch to be launched this fall.
Apple looks to regain momentum
White does say that over the last several years, his trips to China has shown that Apple’s rising momentum has slowed to a crawl over the last 18 months. He cites competing “mega-sized smartphones” as being one of the main causes for this. However, he also discovered that there seems to be a “‘mega-sized’ appetite” for a bigger iPhone 6. In addition to the larger iPhone 6 and the iWatch, he sees the continued ramp-up at China Mobile as being important for the second half of this year.
He continues to rate Apple as a Buy with a $111 per share price target.
