Apple (NASDAQ:AAPL) has earned multiple price target cuts of late as analysts reconsider their iPhone unit estimates for the next few quarters. Despite these cuts, most analysts aren’t worried, even those who are forecasting a unit decline for the all-important holiday quarter. Not all of them are expecting a decline, however, as some are still looking for a new unit record for the December quarter.
Mobile phone unit shipments suggest good things for Apple
In a report dated Dec. 27, Stifel analyst Aaron Rakers and his team explained why they are confident about their strong iPhone unit estimates. They highlighted data on total mobile phone unit shipments from China’s Henan and Shanghai provinces, which they see as important for Apple because the region is heavily dependent on the iPhone for their respective local economies. They believe these two provinces are Apple’s biggest provinces in terms of total iPhone production.
For the December quarter, they’re estimating that the company shipped 74.5 million iPhones, and they believe that the mobile phone shipment data backs up that estimate. Excluding China, they’re expecting shipments in the mid-60 million range.
Slowdown in Apple’s supply chain
What has spooked investors and concerned analysts recently have been signs of weakness in Apple’s supply chain. Indeed, the data from November does suggest a significant slowdown in iPhone shipments, but that follows a very strong October and September. The Stifel team reminds investors that Apple planned to target more than 400 carriers this year with the iPhone 6s lineup – marking an increase of two times from last year’s plan for the iPhone 6 lineup.
The analysts found a 10% increase in mobile phone exports from the Henan and Shanghai provinces in November on a U.S. dollar basis in November. This statistic follows a 15% year over year increase in October plus November mobile phone exports.
During the third quarter, total mobile phone exports increased 38% year over year, indicating that Apple was at least planning for a huge iPhone 6s cycle.
Signs of stability observed in Apple’s supply chain
Looking month over month, mobile phone exports in November tumbled 26%, but September’s month over month increase was 198%, while October’s increase was 34%. November 2014 saw a month over month increase of 17%, compared to September 2014’s 212% and October 2014’s 24% increase. The Stifel team estimates that October and November make up about 70% of Apple’s total December quarter iPhone shipments, then extrapolating a 9.5% year over year growth rate for iPhone shipments.
They add that historically, there has been a high correlation between these numbers and iPhone shipment estimates, which is why they reach their shipment estimate excluding China in the mid-60 million range.
That’s a little higher than their estimate of 61.3 million, and then they assume about 13.4 million iPhones shipped within China (and thus not included in the export numbers.
Apple shares were down 1.01% at $106.94 per share as of this writing. Year to date, the stock is down by more than 3%, but at least for now, it looks like it will remain above $100 when the year ends later this week.
All graphs in this article are courtesy Stifel.