Bank of America Corp (NYSE:BAC) expects a solid demand for iPhone 5, backed by the numbers from 237 Apple Inc. (NASDAQ:AAPL) stores. The report from BOA also does not expect supply constraints, other than those that were originally assumed. The iPhone maker’s stock has ‘modestly underperformed’ since 24th September, due to less than expected first week sales, which has more to do with supply issues than anything else. With strong demand in the first 9 countries of release, coupled with additional pre-order deliveries and the expected demand after the second phase of roll out in 22 more countries, the shipments for the third quarter are expected to reach around 10 million, with overall shipments to be around 24 million units.
The report from BOA covers 237 Apple Inc. (NASDAQ:AAPL) stores, out of the total of 360 in the 9 countries market’s where the iPhone 5 was first rolled out. Till last week, 74 percent of the contacted Apple stores have run out of stock. Even, Apple’s online stores indicate a shipment time of 3-4 weeks, which is consistent with the estimates from BOA “that iPhone 5 demand remains strong, and overall unit shipment is limited by supply constraints. The 2nd phase of roll out took place in 22 countries on 9/28, where we estimate ~310mn mobile subs vs. ~620mn for the 9/21 launch”.
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
As per the report, some of the investors are concerned over weak iPhone 5 demand, due to LTE coverage in Europe. The report believes “While its limited coverage is factually correct, the actual impact on iPhone 5 adoption should be limited “. For the second quarter, LTE devices were less than 1 percent of the total smartphones in EMEA region, while it was below 25 percent in North America, and around 8 percent in Asia. BOA expects the Smartphone vendors “will be more active in launching/marketing LTE phones in 2013” and suggests, “in the near term, Apple could introduce LTE band-specific models with volume commitment”.
BOA expects a strong growth potential for Apple Inc. (NASDAQ:AAPL), given the “opportunity to gain market share in large addressable markets, especially in the PC and handset markets”. It expects that the short term slowdown in iPod units and consumer exposure will be more than compensated by strong revenue and earnings growth. “We find Apple’s valuation compelling, particularly based on the upside potential from revenue and earnings growth in the Mac/PC and iPhone segments and from gross margins, which we think should more than outweigh the near-term slowdown in iPod units and consumer exposure”.