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JP Morgan adds to Apple supply chain worries, cuts early 2016 iPhone estimates

The parade of analysts concerned about weak outlooks from Apple suppliers continues to grow, with J.P. Morgan on Thursday advising investors that it is reducing near-term forecasts for iPhone sales.

Analyst Rod Hall noted that he still sees AAPL stock as "attractive," and advised investors to use any "weakness" in the stock in early 2016 as an opportunity to increase holdings.

Though J.P Morgan remains "overweight" on Apple, the firm did reduce its March quarter iPhone estimates by 8 percent, or 4.9 million units. Hall now sees Apple shipping 55 million iPhones in the three-month span, which would be a decrease from the 61 million iPhones the company sold in its March 2015 quarter.

Like others who have reduced estimates in recent days, Hall was prompted by Apple suppliers, who have indicated some weakness heading into the coming quarters. Specifically, Hall said that comments by Dialog Semiconductor suggest the March quarter could be weaker than expected, while low numbers from Taiwan Semiconductor Manufacturing Co. have prompted a "cautious" view for the proceeding June quarter.

Hall has left his June 2016 quarter estimates untouched, calling for Apple to ship 51 million iPhones in the three-month span. He believes any weakness could be offset by demand for a new, lower-priced 4-inch iPhone model, which is rumored to be in the works.

Hall is more bullish on Apple's fiscal 2017, however, when the company is expected to offer a next-generation "iPhone 7." He sees iPhone shipments returning to 7 percent growth, reaching 251 million units, while average selling prices are projected to decline 4 percent to $624.

Finally, Hall also reduced his estimates for sales of the Apple Watch to 23.5 million in fiscal year 2016. That's a reduction of 6.5 million from his previous estimate.


Despite the reductions, J.P. Morgan has maintained its $145 December 2016 price target on shares of AAPL.

Though analysts have been reducing estimates, they have largely stood by Apple as a solid investment going forward. But investors are concerned that the current iPhone 6s cycle may not drive continued growth for the smartphone platform.

For its part, Apple has advised investors not to read too much into supply chain data for years. Its complex array of component suppliers can vary based on a number of factors, including pricing, yield rates, availability and more.

Back in 2013, Apple Chief Executive Tim Cook said basing assumptions about sales based on limited data is not recommended.

"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," Cook said.