Which Apple Inc. (AAPL) Supply Chain Rumor Should You Believe? – Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (TSM)

Page 1 of 2

The battleground stock that is Apple Inc. (NASDAQ:AAPL) continues to see investors focus heavily on supply chain rumblings from the other side of the world. Shares were weak today, down over 1% this morning, in part due to bearish sentiment among analysts. On the other hand, there’s also some data that could potentially be good news for the iPhone maker.

Which supply chain rumors should investors believe?

Apple Inc. (NASDAQ:AAPL)

The bad news
Topeka Capital analyst Brian White, who has the Street high price target of $888, says that things aren’t so great within Apple’s supply chain. White is the analyst that has compiled a group of Apple suppliers and bundled them into what he refers to as the “Apple Monitor.” The goal is to gain insight into Apple’s pipeline by looking at sales activity of suppliers.

White’s data shows that the Apple Inc. (NASDAQ:AAPL) Monitor saw February sales drop by a whopping 31% sequentially from January, far worse than the average 8% decline due to normal seasonality. That figure is the worst performance that the analyst has on record.

CLSA analyst Avi Silver has now downgraded his rating on Apple Inc. (NASDAQ:AAPL) from “outperform” to “buy” while reducing his price target from $575 to $505, citing lower iPhone unit estimates in the June quarter. This expectation is partially based on a rumored iPhone launch during the summer, in which case sales may decline ahead of new models as consumers are now well attuned to Apple’s rumored product cycles. Silver also sees an upcoming “iPhone Mini” having a negative effect on product mix and margins.

Baird Capital analyst William Power is on record saying the firm’s semiconductor team expects iPhone 5 and iPad shipments to come in below consensus estimates. With the Mobile World Congress wrapping up last week, consumers and investors have gotten a glimpse of the competitive landscape and Power has concerns over Apple’s product demand following the trade show. The analyst is sticking with his $465 price target, which represents modest upside from current prices.

The good news
Reuters is now reporting that both Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) and Hon Hai (Foxconn’s parent company) are each planning on adding 5,000 workers to their ranks. Both companies are looking to recruit students that are preparing to graduate from Taiwan University this year.

The reported job additions are notable for several reasons. First off, Apple shares fell 2% last month on reports that Foxconn was instituting a hiring freeze. Part of the pessimism was since the Financial Times speculated it was due to “weakening demand.” It didn’t matter much that other analysts actually thought the hiring freeze was due to improved working conditions and better wages, leading to higher employee retention.

Regardless, reports that Hon Hai is now ramping up recruiting could signal that it needs more employees to ramp up production of upcoming Apple Inc. (NASDAQ:AAPL) devices. Apple is hardly Hon Hai’s only customer, but it is easily the company’s biggest.

To date, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) and Apple have had no publicly direct business relationship. Speculation has persisted for years that the two companies would inevitably ink a partnership as Apple tries to reduce its reliance on Samsung, but nothing has materialized yet. Apple indirectly gets iDevice chips made by TSMC through other suppliers like QUALCOMM, Inc. (NASDAQ:QCOM) and Broadcom Corporation (NASDAQ:BRCM), but has never tapped the chip manufacturer directly.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!