updated 10:55 am EDT, Fri March 15, 2013
Apple drawing down ahead of refresh, analyst argues
Sterne Agee analyst Shaw Wu has reduced his expected iPhone shipment numbers and lowered his price target for Apple stock, citing "supplier checks" pointing to smaller iPhone build plans. "We are picking up from our supplier checks build plan reductions for iPhone likely due to an inventory drawdown ahead of refreshes in the 2H," he writes in a new investor memo. The analyst's price target has been slashed from $715 to $630.
"In addition, we see evidence of sourcing activity for what appears to be iPhone 5S and a lower-cost iPhone using composite material casing," he continues. "We are reducing our iPhone forecast but leaving iPads and Macs intact. With 2 weeks left [in the March quarter], we believe AAPL will likely hit the lower end of its guidance. The good news is this is better than most expecting a miss."
Rumors of a new but low-cost iPhone model have been increasing in the past few months. Also backing the idea of a composite case is KGI Securities analyst Ming-Chi Kuo, who expects the phone to have a "super-thin plastic casing mixed with glass fiber," making it stronger than normal plastic cellphone casings. Apple has allegedly contracted with Foxconn and the Jabil group's Green Point for the part; while Foxconn will both produce casings and assemble phones, Green Point is expected to hand off casings to Pegatron. Kuo also anticipates casings coming in a range of four to six colors, and having a thickness of 0.4 to 0.6mm, below a more typical 0.7 to 1mm.
The analyst also claims that Apple will stick with a 4-inch display for the low-cost phone, despite rumors of a move to 4.5 inches. The device's specifications were picked in 2011, he alleges, suggesting moreover that Apple is unlikely to switch tacks despite an industry shift towards screens closer to 5 inches.