Apple Inc. (AAPL) Experiences Seasonal High in iPhone Demand, Sales to Rebound

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The phenomenal reception of the iPhone SE, soon-to-be-released iPhone 7, and supply-chain checks indicate Apple’s iPhone sales would rebound this year

When Apple Inc. (NASDAQ:AAPL) decided to roll out a new iPhone this year in the old, 4-inch form-factor, the company might not have imagined that it would soon run out of inventory. Orders for the iPhone SE are already facing shipment delays; this, combined with positive comments from Apple suppliers, suggests that the company is due for a rebound in iPhone sales.

Brian White, an analyst at Drexel Hamilton, currently maintains a Buy rating and $200 price target on the stock. The research firm held checks with Apple suppliers, which revealed that the company is on its way to experience a seasonal high in iPhone demand. According to the equity research firm, some of Apple’s Taiwanese suppliers have revealed that Apple’s iPhone sales for March were above-average compared to the last 11 months. Mr. White believes that sales will only get better for Apple this year, considering the imminent release of its iPhone 7 with the subsequent cycle driven even further from the company’s foray into new geographic territories.

According to Drexel Hamilton, in March, sales of “Apple Monitor” companies – Apple suppliers in Taiwan – rose 42% from the prior month, compared to the 11-month average of a 30% month-over-month increase. This spike portends well for Apple’s sales growth. It’s true that Apple’s first quarter of fiscal year 2016 was a disappointment as Drexel’s Apple Monitor reflected a 35% sequential decline in sales, which was pretty bad given that the average decline over the last decade has been only 17%.

Apple has guided for further decline in sales – a 30-35% sequential one – for the second quarter of the year. On the other hand, key Apple Taiwanese supplier Hon Hai has reported 21% growth for March, which bodes well for the iPhone maker, given that its sales pattern has been congruent to Apple’s sales growth pattern over the past 10 years.

To top this, analysts have pointed out the fact that the inventory of the newly-released iPhone SE is short of number of orders, as Apple struggles to keep up with a backlog of orders and has delayed shipment for several orders for over a fortnight. The iPhone SE’s success is evident by the fact that even though the model goes against the market trend of bigger-screen smartphones, with it, Apple has created a runway success from what was simply an upgrade to the iPhone 5S. In order to keep up with rising demand, the $606.5 billion company might have to keep churning out iPhone after iPhone.

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