Morningstar

Reaction to Reduced iPhone Orders Overblown

Production in the 80 million range would be entirely reasonable and is not an indication that iPhone end customer demand (and thus revenue) will be significantly lower than last year.

Securities In This Article
Apple Inc
(AAPL)

We will maintain our $175 fair value estimate for narrow-moat Apple, as the Nikkei Asian Review reported, "Apple warns suppliers of 20% drop in new iPhone parts orders." We're also maintaining our fair value estimates for related chip suppliers like narrow-moat Skyworks ($106) and Qorvo ($83). We continue to view Apple as slightly overvalued and see a modest margin of safety in Skyworks today.

If accurate, the report suggests that initial iPhone production for

We note that our $175 fair value estimate for Apple is not based on the hopes of an iPhone super cycle in the next 12 months, especially since this is the second year of a high-end iPhone model with 3D sense and OLED screens, rather than a brand new introduction. We continue to model Apple selling iPhone units in the high-70 million unit range in the December 2018 quarter, again relatively in line with recent historical results. Our fair value estimates for Skyworks, Qorvo, and many other iPhone-related chipmakers also incorporate similar sales levels.

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About the Author

Brian Colello, CFA

Strategist
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Brian Colello, CPA, is a strategist, AM Technology, for Morningstar*. He covers semiconductor and hardware companies and supports our equity research-linked Indexes business. Colello was a Director of Technology Equity Research before assuming his current role in 2023.

Before joining Morningstar in 2008, Colello worked in public accounting for KPMG and served as a manager in corporate finance for BMG Music, a subsidiary of Bertelsmann AG.

Colello holds a bachelor’s degree in accounting from Bucknell University. He also holds a master’s degree in business administration from Wake Forest University’s Babcock School of Business. He is also a Certified Public Accountant.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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