From a note to clients by analyst Amit Daryanani that landed on my desktop Wednesday:
ALL YOU NEED TO KNOW: May smartphone data points to an overall slowdown in the smartphone market for the month though is a stronger data point for AAPL. The smartphone data suggests iPhone units were up +35% y/y in the month of May (+37% m/m). We would add that while this month’s overall results mark continued deceleration from the steep growth trajectory seen in smartphones in January to March, those three months of shipments were up an impressive 102% vs. the same three month period in 2020, pointing to more durable broad-based strength and suggesting the slowdown in April and May more likely constitutes a pause than the beginning of a longer-term slump. Taking a broader look at the overall smartphone market in China, the data shows deceleration as shipments shrunk by -30.7% y/y and -16.3% m/m. The data set includes shipments broken down by domestic vs. multi-national companies. Apple accounts for greater than 90% of the multinational (MNC) shipments, so it serves as a reasonable proxy now that shipment data is no longer broken down by operating system. In Apple’s Mar-qtr print, we saw the company achieve 67% growth in iPhones, and the monetization narrative that is now just starting to take hold could drive sizable upside.
Net/net: The data point shows sustained strong growth out of China despite a softer overall smartphone market. Furthermore, we expect growth to remain strong for AAPL in Jun-qtr and beyond as the company benefits from a trifecta of – iPhone growth in N. America (stimulus + reopening), ecosystem expansion, and monetization of their install base.
Maintains Outperform rating and $175 target.
Below: MNC (read, Apple) shipments performed notably better than the broader market with y/y growth of +35.2%.
My take: If this report sounds familiar, that’s probably because the data have been trending this way for several months now.