Supply chain seeing stronger than expected iPhone 12 holiday quarter demand

Earnings and other data from Apple's supply chain suggests that demand for the iPhone 12 and iPhone 12 Pro is much stronger than expected, according to Morgan Stanley.

In a note to investors seen by AppleInsider, analyst Katy Huberty points out that Apple's U.S. suppliers reported stronger than expected revenue and earnings in the past week, which is a sign of strong supply chain orders.

Seven Apple suppliers, including Qualcomm, Texas Instruments, Qorvo, and Cirrus Logic, reported earnings that surprised to the upside and beat consensus estimates by an average of 7%. Those suppliers also issued guidance above consensus by about 13% on average, implying a 12% quarter-over-quarter revenue growth after three years of flat seasonality growth.

Huberty points out that the delayed launch of the iPhone 12 mini and iPhone 12 Pro Max could explain this better seasonality, but supplier commentary also indicates that demand is exceeding prior expectations.

This data also lines up with iPhone build increases for the December quarter and current indications of demand for released models. Huberty notes that lead times for the iPhone 12 Pro remain flat week-over-week at 25 days, the longest of any iPhone model at this point in the cycle.

The analyst says that supply chain data and longer lead times support Morgan Stanley's above consensus iPhone shipment forecast of 220 million units for the 2021 calendar year.

All of this points toward a best case scenario for the iPhone 12 lineup, since the combination of more models, 5G support, and aggressive carrier subsidies are "likely to accelerate iPhone revenue growth from the already strong C3Q levels."

Huberty's 12-month AAPL price target remains at $136, based on a 5.9x enterprise value-to-sales multiple on Apple's product business and a 10.5x EV/Sales multiple on Apple's Services business. That results in a 6.7x EV/Sales multiple for 2021, and a target 33.3x price-to-earnings multiple for that year.

Shares of AAPL were trading at $116.64 in intra-day trading on Friday morning.