Susquehanna Financial Group analyst Christopher Caso has raised his Apple (NASDAQ:AAPL) price target from $625 to $650 and reiterated a “Positive” rating based on good results from his manufacturing and supply chain checks. In a note to investors obtained by Barron’s, Caso wrote that Apple will likely get a revenue and margin boost from a “significant production shift from iPhone 5C to 5S.” Although Caso’s total iPhone unit sales estimate for the December quarter remains the same, the production shift would “imply a much stronger mix than originally anticipated.”
“Following our most recent checks, we believe December iPhone builds are running in the 52-54 mln range, essentially in-line with our October 8 checks but better than our read in early December,” wrote Caso in a note via Barron’s. “Our checks indicate the mix has indeed shifted disproportionately to iPhone 5S, with production of 5S running nearly 4x that of 5C.”
The Susquehanna analyst estimated that approximately 10 million units worth of iPhone 5C production have been shifted to the iPhone 5S. Overall, Caso estimated that Apple would produce about 36 million iPhone 5S units, 10 million iPhone 5C units, and 7 million iPhone 4/4S units in the December quarter. The analyst also noted that, “There wasn’t a fall off in demand for iPhone 5S after the initial strength of the launch.”
Based on his supply chain checks and the increased iPhone 5S production rates, Caso raised his December quarter revenue estimate for Apple to $57.1 billion from $56.6 billion, reports Barron’s. He also raised his current quarter EPS estimate to $14.02 from $13.54. The Susquehanna analyst also weighed in on Apple’s anticipated iPhone 6 launch in 2014. Caso previously believed that the iPhone 6 would launch in June or July of next year in order to keep the iPhone sales momentum going. However, Caso noted that the strong current sales of the iPhone 5 lessen the necessity for a summertime iPhone launch next year.
“Part of the imperative to have iPhone 6 launch earlier in the calendar relative to iPhone 5 and 5S was perhaps a fear that they needed a more significant phone launch to reignite sales,” wrote the analyst via Barron’s. “But iPhone 5S is selling better than we had thought, and based on these production checks it appears to be selling better than AAPL thought also. In total, we still expect an iPhone 6 launch in June/July based on current build plans, but we also think the success of iPhone 5S has removed some of the time pressure for iPhone 6.”
Caso’s positive note on Apple comes on the heels of yesterday’s disappointment when China Mobile (NYSE:CHL) failed to announce a distribution deal with the Cupertino-based company at a global partner conference in Guangzhou. Here’s how Apple has traded over the past five sessions.
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