Apple stock (AAPL) – Get Apple Inc. Report could be on the verge of another rally. While shares are modestly down for the day as I write this sentence, they have climbed a whopping 9% from the intraday low of only one week ago.
The market landscape remains challenging for stocks, but Apple’s strong business fundamentals make it stand out. The iPhone segment, in particular, may be the key pillar of Apple stock’s next rally — which investors hope will not take very long to shape up.
Figure 1: Apple Stock: iPhone Likely To Fuel The Next Rally
Unsplash
(Read more from the Apple Maven: Apple Stock: Bright Green Light To Buy, Says One Analyst)
iPhone could support next rally
The Cupertino company has recently unveiled its new iPhone SE 3rd Generation. Although the stock sputtered following the launch event, experts seem convinced that the device will help Apple to produce solid financial results in the future.
Some of these same Wall Street analysts have followed up on the iPhone opportunity, and the message remains generally optimistic.
JPMorgan’s Samik Chatterjee, for example, does a good job at tracking iPhone lead times. The longer they are, the higher the likelihood of robust demand for the product.
The analyst has recently reported that the new iPhone SE’s lead time has expanded in the past week. He warns, however, that some of this change could be related to tighter supply rather than increased demand.
Loop Capital’s John Donovan offered a more decisively bullish observation. According to him, iPhone ASP (average selling prices) have been tracking well ahead of expectations. In great part, this is a function of the pricier, higher-end iPhones having done very well lately.
All of the above echoes what Morgan Stanley’s Katy Huberty said shortly after Apple’s “Peek Performance” event. According to her, an iPhone SE that is 5G capable and that sells for less than $500 provides “upside risk” to iPhone estimates in fiscal 2022.
One of the key concerns about the iPhone opportunity not materializing to its fullest extent in 2022 are the supply chain disruptions. But even here, the recent news has been encouraging.
According to Seeking Alpha, Apple’s key supplier Foxconn has returned to full operation in the Chinese tech hub of Shenzhen. The large plant had been totally or partially shut down due to COVID-19 concerns.
iPhone: the uphill climb
Despite all the bullishness towards the iPhone, it is very likely that the segment will post dismal YOY results in the next three quarters at least.
This is not because Wall Street might be wrong about strong demand for the product. Rather, it is due to very tough comps against a fiscal 2021 of iPhone sales that was outstanding.
The chart below paints a picture. Starting in the current period, whose numbers should be reported in about 6 weeks, the iPhone segment will face astonishing comps of up to 65%. Could a very low or negative growth rate for the remainder of fiscal 2022 hurt investor sentiment?
Figure 2: iPhone revenue growth since F19.
DM Martins Research, data from Apple
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)