Apple Inc. (NASDAQ:AAPL) stock jumped on Monday and again on Tuesday as Samsung’s woes with the Galaxy Note 7 worsen. The Korean smartphone maker has halted production of the phone, and Apple bulls are virtually salivating with excitement. So far, their expectations for Apple stock to keep rising from here on are playing out as the shares look to be headed back to their 52-week high of $123.82, which was set nearly a year ago.
AAPL stock to benefit from Galaxy Note 7 woes
Analysts from multiple firms are excitedly releasing reports about how Apple Inc. (NASDAQ:AAPL) should benefit from Samsung’s decision to pull the Galaxy Note 7 from store shelves and has halted production. However, they don’t mention the growing number of iPhones that have been exploding lately. Apple has opened an investigation into two of the most recent cases, although the number of exploding iPhones is far below the number of Note 7 handsets that have exploded.
Credit Suisse analyst Kulbunder Garcha called Samsung’s pulling of the Note 7 “another tailwind” for Apple Inc. (NASDAQ:AAPL). Although he has been conservative in viewing the problems as benefitting the iPhone maker, he now thinks that Samsung’s brand has sustained enough damage that it should be taken into consideration.
Odey Asset Management's Special Situations Fund was down 3.2% in March, compared to its benchmark, the MSCI World USD Index, which was up 3.3%. Through the end of March, the fund is up 8.7%, beating the benchmark's return of 4.9%. Q1 2021 hedge fund letters, conferences and more Odey's Special Situations Fund deploys arbitrage and Read More
He noted that the market for smartphones priced above $400 stands at around 360 million units annually, with Apple Inc. (NASDAQ:AAPL) holding 55% of the market and Samsung a 33% share. He believes the Note 7 problems could cause a shift in market share away from Samsung and toward Apple Inc. (NASDAQ:AAPL), and he adds that any gain would be incremental. He estimates that every 5% share of the high-end smartphone market adds about 5% to 7% to Apple’s earnings per share. Further, this could be a long-term benefit as Android users switch to iOS, which has a 95% retention rate.
Apple suppliers seeing ups and downs
Drexel Hamilton analyst Brian White released the latest results from his Apple Monitor on Friday and said that September sales for the company’s Taiwanese suppliers were far below the historical average for the month. On the flip side, he said it was the best third quarter in history.
September Apple Monitor sales grew 5% month over month, lower than the 14% 11-year average growth. The five-year month over month average is a 19% increase because of the increased seasonality around the iPhone, and last year, his monitor logged a 14% increase. However, he’s not worried about the slow growth in September because August was the best August ever and July was the second-best July ever.
Further, third-quarter Apple Monitor sales grew 32% quarter over quarter, beating the average 19% increase over the last 11 years. As a result, Apple stock is still his best pick for the second half of the year because he believes the iPhone unit cycle has bottomed, although the shares remain low.
Shares of Apple Inc. (NASDAQ:AAPL) stock rose by as much as 1.05% to $117.27 during regular trading hours on Tuesday.