Strong iPhone Sales in China Indicate Undervalued AAPL Stocks

Apple's iPhone 5 | Apple Official Website

Apple’s iPhone 5 | Apple Official Website

Two prominent investment firms pointed out that the record breaking sales of iPhone 5 in China is a sign that Apple’s shares is undervalued. There were also claims that the strong performance is likely to show up in this quarter’s financial performance.

iPhone 5—Outpacing iPhone 4S

RBC Capital Markets viewed this week’s news about Apple selling two million iPhone 5 units during its launch weekend as a positive sign. That’s because the company “continues to outpace the previous iPhone 4S launch”, posing for a positive December quarter. In relation to this, the firm stuck its Outperform rating for AAPL, as well as its $750 price target.

In addition, Wells Fargo sees a strong opening for Apple in China, saying that the iPhone maker is on track to meeting the firm’s estimate of 46 million handsets during the December quarter. Wells Fargo also sees a potential seasonal drop-off after a strong holiday quarter, although they maintained an Outperform rating that ranges from $710 to $730.

Despite the strong performance, the firm sees potential risk for Apple in the horizon. The Cupertino-based company will see slowing growth due to tough comparisons, as well as the possibility of disruptions due to legal disputes. It could also pose supply constraints for Apple.

Over all, Wells Fargo has a positive outlook for Apple. The investment company believes that the iPhone 5 will wind up as “the largest product cycle in consumer electronics’ history.” They even call Apple as an innovative DNA, while its “unmatched” ecosystem within the industry is sure to result in the company’s continuous taking of value share across its core markets.

Strong iPhone Launch = Growth Opportunity

On the other hand, Brian White of Topeka Capital Markets reacted positively to Apple’s record-breaking sales of iPhone 5 in China. In fact, Greater China has become integral in the iPhone maker’s business, generating about 15 percent of the company’s fiscal 2012 sales. It is also expected that China’s role with Apple’s business will grow, especially with iPhone 5’s strong debut.

Sales of iPhone 5 in China were so strong that Apple issued a press release last Sunday night. As stated by CEO Tim Cook:

Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China. China is a very important market for us  and customers there cannot wait to get their hands on Apple products.

Leave a Comment