Written by Norman Isaac Mwambazi

Apple reportedly plans iPhone production cuts; analyst tips its stock as a ‘golden buying opportunity’

As most companies struggled and continue to struggle through the COVID-19 pandemic, tech giant Apple Inc. is one of the …

As most companies struggled and continue to struggle through the COVID-19 pandemic, tech giant Apple Inc. is one of the few companies that posted positive earnings throughout the quarters of FY2020. To put this into perspective, Apple Inc. stock rose 69.4% over the past 12 months outperforming the Dow Jones Industrial Average (DJIA) that advanced 28.6% in the same period.

However, after hitting highs in January this year, Apple shares are off more than 16%, but if the words of seasoned analyst Daniel Ives from Wedbush are to go by, investors should not be worried because this dip presents a “golden buying opportunity” and that they should take advantage of it.

Ives added Apple to his company’s “best ideas” list Wednesday, writing that there is room for the trillion-dollar company to positively surprise Wall Street with its iPhone results this fiscal year. In the Wednesday morning trading session, Apple’s stock edged 0.2% lower.

On Wednesday, March 10, 2021, Nikkei Asia reported that Apple was making dramatic cuts to its prior iPhone 12 Mini production plans from December. The report further said that the company is also making “comparatively mild” cuts to other iPhone models, and this is partly due to some components and parts once meant for the iPhone Mini are being shifted over to the more expensive models.

Ives said that concerns about these cuts have affected the company’s stock in recent weeks, but he says that there is an opportunity for the company to bounce back.

The analyst says that although FactSet consensus projects that Apple will sell 224 million iPhone units this fiscal year, he maintains that the smartphone and other electronics maker could beat this projection and sell more than 240 million iPhones, putting into consideration the strong demand in Asia and the fact that a large base of iPhones globally need upgrades.

He wrote average selling prices should benefit as Apple seems to be having success selling more expensive iPhone models like the iPhone 12 Pro and iPhone 12 Pro Max while the iPhone 12 Mini is being “significantly scaled-down around production/demand globally.”

The Nikkei Asia report said that despite the planned cuts, the new production targets are still slightly above Apple’s shipments from the same period a year ago. Citing some sources that were not named, the report further said that Apple’s cuts come after the company may have been especially aggressive with its targets months ago to ensure it would have enough components at a time when some were in short supply.

Ives remains upbeat about Apple’s iPhone prospects, arguing that the “supercycle party” could continue with the iPhone 13 expected out this fall given optimistic supply-chain indications.

“I have increased confidence that iPhone 13 will have a 1 terabyte storage option which is double from the highest Pro storage capacity today,” Ives said, suggesting Apple could have more pricing opportunity. He has an outperform rating and a $175 price target on the stock.

Analysts at IDC forecast Wednesday that overall smartphone shipments could rise 5.5% in 2021, fuelled by the greater availability of 5G-enabled devices and “pent-up demand” for new phones. For 2020, IDC had calculated that smartphone shipments dropped 5.9% from a year before.

Apple’s stock is currently trading at $121.92 per share.

Stock prices quoted in this article can change at any time.