iPhone 5 demand 'robust,' order cuts likely stem from improved yields & supplier shiftsWhile recent reports about iPhone 5 component orders being reduced have caused "great confusion," the reality is consumer demand for the iPhone 5 has not waned.
Analyst Shaw Wu with Sterne Agee revealed in a note to investors on Tuesday that his checks with suppliers indicate that demand for the iPhone 5 "remains robust." He's not concerned by recent reports that interpreted iPhone 5 order cuts as a sign of weak demand.
Wu joins a growing chorus of market watchers who believe any order cuts for iPhone 5 components are not representative of consumer interest. Mark Moskowitz of J.P. Morgan said the reports are just "more noise" that will prompt investors to overreact, while Maynard Um of Wells Fargo said any cuts are actually "not news."
For his part, Wu believes that reduced orders for iPhone 5 components are a result of improved yields, which has required Apple to place fewer orders for components. In addition, he said supplier shift changes made by Apple have contributed to the cuts.
With so much attention on Apple's future, Wu believes Apple's guidance for its March quarter will be the "trickiest" that he can remember.
He expects Apple will give "vintage conservative" guidance, as it has traditionally done. But while in the past investors would brush aside Apple's soft guidance, this time some may view the guidance as a sign of weak demand.
As for Apple's recently concluded December quarter, Wu expects iPhone sales and gross margins will likely surprise investors to the upside. His forecast calls for sales of 47.5 million iPhones, above market consensus of 46 million to 47 million, with gross margin of 38.7 percent, versus expectations of 38.3 percent.
Sterne Agee has a price target of $840 for AAPL stock, with a "buy" recommendation for investors. Apple will report its earnings next Wednesday, Jan. 23 a call that is viewed by some as the company's most important in 10 years.