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Morgan Stanley says the recent fall in Apple’s shares is nothing more than a chance to snap up the shares.
Justin Sullivan / Getty Images
Apple
stocks have lagged behind the broader market in recent weeks. One analyst says it offers a good buying opportunity.
The tech giant’s shares have plummeted 16% since reaching a closing peak of $ 142.95 on January 26. In comparison, the Nasdaq Composite fell less than 3%, and the S&P 500 rose 2% in the same period. Apple’s shares fell 1.8% in Friday’s latest trading to $ 119.72.
The company hasn’t said anything relevant in recent weeks, but there has been considerable speculation that demand for the iPhone may be declining. News service Nikkei Asia reported earlier this week that Apple recently cut its production plans for the first half of the year by 20%, due in large part to weak demand for the iPhone 12 mini, the low-end version of the line. iPhone with 5G capacity announced last fall. Apple did not comment on the Nikkei report and did not respond to a Barron’s request for comment on it earlier this week.
In a research note Friday,
Morgan Stanley
Hardware analyst Katy Huberty repeated her overweight rating and $ 164 target price for Apple shares, saying the recent sale is a buying opportunity and that recent conversations about developments in the supply chain Taiwan are more noise than substance.
“In the past two weeks, we’ve seen reports of [other analysts] that Apple is cutting iPhone production, ”she writes. “These reports contributed to Apple’s recent underperformance and investors are asking what we are hearing from the supply chain and how it affects our view of iPhone shipments this year.”
Huberty’s view is that the reports say nothing about the fundamental perspective. Checks by colleagues in Asia show that orders to manufacture iPhone 12 models – in addition to the mini – and older iPhone 11 models are increasing, not decreasing.
The analyst writes that monthly sales reports from Taiwanese component suppliers accelerated in February for the fifth consecutive month. “At a high level, these data points are positively read for strong sustained demand from the iPhone,” she says.
In addition, she notes that Apple continues to see strong demand for iPhone in China, with sales surpassing those of domestic smartphone suppliers. She estimates that, based on government data on handset sales, Apple’s iPhone sales in China increased 157% in January compared to the previous year and 314% in February. Third-party data shows that Apple’s share of the installed base of smartphones reached 20.4% last month, an increase of 85 basis points year on year, and marking the sixth consecutive month of increased market share, she adds.
Although Huberty admits there is growing evidence of low demand for the iPhone 12 mini, overall she still thinks the consensus estimates for the iPhone’s 2021 tax sales are too low.
“We heard anecdotally from our semiconductor colleagues that Apple’s memory purchases remain robust, which would go against the narrative of significant cuts in the iPhone,” she writes. “Putting it all together, we believe that the news surrounding the major cuts in iPhone production is probably more supply chain noise than a material concern.”
Write to Eric J. Savitz at [email protected]