Apple: Data Mounts On The Success Of The iPhone 12

The iPhone flopped in fiscal fourth quarter 2020, driven by the delayed release of the 5G model. But the story is about to be flipped on its head, as analysts report strong demand for the device in the holiday period.
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iPhone sales did not impress at all in fiscal fourth quarter 2020. Segment revenues were down a whopping 21% year-over-year, by far the worst of any product or service category.

During the most recent earnings call, the management team blamed the delayed release of the iPhone 12 for the poor performance, and forecasted that the segment would return to growth in the holiday quarter.

Judging by what some analysts have been saying, CEO Tim Cook and company may have been right about strong demand for iPhones in November and December.

Let’s look at a couple of the most recent sell-side notes on yet-to-be reported iPhone sales.

Wedbush: better than best

Analyst Dan Ives has been an Apple bull for a long time. He tends to offer a base-case and a best-case scenarios for financial performance and stock price upside.

According to the analyst, iPhone 12 sales have already exceeded his bullish forecast. He cites his channel checks in Asia to declare the holiday season a success in countries like China, where the 5G infrastructure is well developed relative to the rest of the world. More specifically, he says:

“The supply chain is expecting low to mid 90 million iPhone unit builds for the quarter, comfortably ahead of the 80 million to mid 80s range expected in mid December, 75 million expected in late October and 65 million to 70 million range expected three months ago.”

Beyond smartphone sales, Dan Ives also believes in the strength of other product categories. He mentions AirPods as “another product tailwind heading into 2021”, likely supported by the brand-new over-the-ear device, the AirPods Max.

JPMorgan confirms high demand

Dan Ives was not the only one to sound the bullish alarm on the iPhone 12 lately. JPMorgan chimed in, when its analyst Samik Chatterjee stated:

“Aggregate lead times for 12 Pro still remains quite robust and above 20 days, implying continued robust demand.”

In plain English, this simply means that demand for the higher end smartphone seems to be greater than supply.

Either Apple has been having supply chain challenges (unlikely, given how competent the company has been at managing its production process), or early fiscal 2021 revenues look promising.

The Apple Maven’s take

I am looking forward to January 28, the day that Apple will likely release its fiscal first quarter results. On that day, I expect the Cupertino company to finally post impressive iPhone revenues, after a few quarters of mediocre performance.

The recent sell-side reports have been confirming a trend that the Apple Maven has recently discussed: the 5G super cycle is well underway. The 30% increase in iPhone production reported by Japan’s Nikkei Asian Review in December largely matches the 35% rise from original forecasts reported by Wedbush.

When data overlaps this well, investors have good reasons to be that much more confident (and optimistic) about the iPhone’s holiday quarter financial results.

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