Piper Jaffray tells investors not to fret over vague iPhone supplier cuts

Apple investors showed concern this week after iPhone supplier Dialog Semiconductor warned revenue will fall short of expectations, but Piper Jaffray took the opportunity to remind Wall Street that it's unwise to read into supplier data.

Dialog Semiconductor this week cut its December quarter guidance by 11 percent compared to prior guidance. That led some investors to speculate that the cuts could be related to lower-than-expected iPhone sales.

Analyst Gene Munster of Piper Jaffray doesn't share those concerns, however. He issued a note to investors saying that he sees little risk to Apple's own December quarter.

"Apple has previously said, and we would agree, that individual component suppliers are not indicative of the health of the overall iPhone business," Munster wrote.

Munster was referring to comments made by Apple Chief Executive Tim Cook in 2013, in which he warned investors not to read too much into supply chain data. Apple frequently uses multiple suppliers for the same components, and will skew orders towards different companies for a variety of internal reasons, such as pricing, yield rates, technology and otherwise.

"The supply chain is very complex, and we obviously have multiple sources for things," Cook said. "Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business."

Regardless of any current supplier maneuvering, the performance of the iPhone 6s product cycle may not mean as much for Apple on Wall Street in the long run, Munster said. Feedback he's heard from investors appears focused on whether the iPhone can continue to grow with an anticipated redesign in 2016.

For the so-called "iPhone 7," Munster said this week that he remains confident. His forecast calls for the next-generation iPhone to see 4 percent growth.

In the shorter term, Cook himself gave investors a number of reasons to expect continued iPhone growth with the current iPhone 6s product cycle. Specifically, he said that Apple has seen historic rates of switchers from Android devices, plus a low percentage of the current install base having upgraded to the larger iPhone 6 and iPhone 6 Plus models.

Cook also expects further growth from emerging markets like China. Based on his bullishness, Munster believes iPhone sales will post year-over-year growth of 2 percent in the March 2016 quarter.

Piper Jaffray has maintained its price target of $179 for shares of AAPL with an "overweight" rating.

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60 Comments

suddenly newton 13819 comments · 14 Years

About 8 years ago

Individual component suppliers are indicative of the arrival of a new Apple television. /s

schlack 727 comments · 11 Years

hope they continue to grow....BUT...even if sales were to stabilize...they would continue to profit at an unheard of rate....and as long as they either hold the cash or buy back shares...their share values should continue to increase substantially from the very low current PE ratio.

bobschlob 1074 comments · 11 Years

2012 - 2013 all over again.

They like to say, "Wall St hates this stock".
Ha! Wall St loves this stock.

rogifan_old 725 comments · 9 Years

sog35 said:h

Tim Cook should be saying this.

I thought you were leaving.

Anyway I agree that the company, and especially Tim Cook needs to do a better job driving the narrative. At some point you have to hold the company responsible for the sentiment about it.

sog35 said:

Tim Cook is a joke of CEO.

He takes the time to trump up gay rights, minority rights, and coding for 10 year olds.

Yet he does not have 5 minutes to go on an interview on CNBC and say holiday sales are going great and confirming guidance? If he just did that the stock would be solidly at $120 right now.

I so sick of this pathetic CEO. So many reasons why he sucks. But it gets masked because of the power of the Apple brand. Let me name you the ways:

1. Not bringing an bigger iPhone in 2013. No excuse for not bringing out the 4.7 inch iPhone along with the 5s. This allowed Samsung to make massive inroads. It took almost 2 years to reverse that bad move.

2. Waiting too long to get into streaming music. If they were ahead of the curve they would have been dominating streaming music.

3. Pathetic iPad lineup. Intentionally hamstringing the iPad Mini. Then refusing to release an updated Air in 2015. WTF is that about. iPad sales shrinking 20%. Not pushing for iPad specific Apps. He totally botched the iPad the last 2 years. Things such as the Pencil and type cover should have been out TWO YEARS AGO. Yet his arrogance refused him to believe that the Surface had something right.

4. Watch software failure. The software is too hard to use. Too much emphasis on the $20k watches. Apps are way too slow. Prices are way too expensive.

5. Refusal to sacrifice some short-term profits for long-term success. Keeping the 16GB iPhone. Being stingy on RAM. Releasing half baked iOS updates with a ton of bugs.

6. Crappy jobs controlling the narrative. Wall street spews bullshit and Cook does nothing. Some flyby night media in China is seen as more crediable than Cook. Pathetic.

But this should not be a surprise. Cook is a bean counter not a visionary. He has not VISION. All he cares about is trying to meet the profit goals for the next quarter. He spends $120 billion on a buyback to appease Wall Street yet does not have 5 minutes to shut down bullshit Wall Street rumors.

Someone needs to put down the crack pipe.