“It feels like there is something fishy going on here.”
Excerpts from the notes I’ve seen. More as they come in:
Wamsi Mohan, Merrill Lynch: Media reports Apple iPhone 13 order cuts, slower demand. Bloomberg recently reported that Apple has informed its suppliers that demand for iPhone 13 is slowing. Earlier, it had reported iPhone order cuts of 10mn (vs. initial plan of 90mn); however, now, as per Bloomberg, Apple believes that some of the demand may be lost. While we have not confirmed independently of any supply cuts, we note that our iPhone estimates are already below Street estimates (79mn vs. 82mn for the Dec quarter, and 46mn vs. 56mn for the Mar quarter). As such, we leave our iPhone estimates unchanged. Neutral. $160.
Chris Caso, Raymond James: Thoughts on iPhone Demand. The nature of the article is much more ambiguous than typical Apple supply chain reports. Historically, the best gauge of demand has been the production forecast, and whether that forecast is increasing or decreasing. The article doesn’t mention changes to the production forecast, but only that Apple has reportedly told suppliers that demand had slowed, which is a more ambiguous statement. Our own checks haven’t uncovered significant changes thus far. Given the supply constraints facing Apple at the start of the quarter, it would certainly be surprising if Apple were to cut production, and we would view production cuts as a negative read on demand. Outperform.
Mark Cranfield, Bloomberg: Tech Bears Being Burned Before Cautious Despite Apple Warning. There has been a bit of head scratching among tech investors in Asia at the limited reaction to Apple’s warning about falling iPhone demand. Nasdaq futures and the shares of some Apple suppliers are subdued after the report. That could be because traders don’t want to be burned again by selling too early… In the meantime Asian investors will have to wait for U.S. traders to log on later today to get a clearer read on the response to Apple and tech stocks more broadly. But, if the problem really is dampening demand, it will be hard to put a positive spin on that.
Neil Cybart, Above Avalon: It feels like there is something fishy going on here. One can’t help but wonder if some funds either front ran the report (i.e. they knew this information, regardless of its accuracy, was going to be given to Bloomberg and reported on) or if the information was provided to Bloomberg by certain parties after the runup in shares on Tuesday. The former seems more likely… The way this strategy would work is that a fund(s) began buying Apple shares on Tuesday morning with the intention of kicking off a momentum-fueled move higher in price. It takes a surprisingly small amount of demand to temporarily get AAPL shares moving higher before additional demand quickly enters the market. As AAPL shares shot higher, more players jumped in with algorithms picking up the stock’s outperformance. The fund(s) that kicked off the initial move higher sold their shares (making a profit) and then went further by shorting the stock (selling shares that they don’t currently have) as the stock continued to soar. The plan is to buy the shares needed to close out short positions at a lower price, say, after a questionable report about iPhone demand was published. AAPL shares traded down as much as 7.3% from the top put in on Tuesday to the low earlier today. Similar strategies involving options are also possible.