Share of Apple Inc. (NASDAQ:AAPL) traded below $500 again on Friday as analysts poured in on reasons why the stock continues to fare so poorly.
2013 has been a rough year so far for AAPL stock, and Maynard Um of Wells Fargo tried to assuage shareholder concerns on Friday, by writing them off as a condition that will ease as the year goes on.
He’s dubbed the current slump the shares have seen “black ice” and expects that it will thaw over the summer as investor sentiment improves with distancing from the highs the iPhone4 and 4s brought in 2011. Many analysts have already speculated that the kind of profits seen in the 2011 December quarter set shareholder expectations too high for the same quarter in 2012. When a large reduction in components ordered for manufacture was announced, it only further served to scare investors who were already
But the reason that Um believes profits will increase by summer is also related to iPhone components. One of the reasons the Apple Inc. (AAPL) profit margin was so high with the release of the iPhone 4s is that is shared components with the 4, which means they were readily available and cost the company far less to utilize in terms of research and development. Um predicts that the same phenomenon will occur when the 5s is released this spring.
Perhaps then the insinuation that Apple cut back on iPhone 5 parts production is actually tied to reasons of efficiency after all as analysts have already speculated. It’s not hard to imagine that the smartphone maker has actually gotten smarter at producing them over time, and has gotten better at predicting demand.
It could also be as Um insinuates, that when new products are introduced, there’s a slight decrease in profit due to R&D and switching over production to meet the new specifications. Recent reports show that Sharp has nearly halted production of 9.7 inch screens, which may mean that either we’re getting the retina displays that have been in the rumor mill for so long, or that demand has demonstrably shifted to the Apple (AAPL) iPad Mini. It might also mean that Apple has streamlined that process as well and already has a sizable inventory of screens to get it through the next product cycle as would follow a thorough understanding of how supply-chain management works.
This development could also mean that the slimmer, lighter iPad analyst Ming-Chi Kuo predicted this week is on its way. The iPad 5 is expected to have a display similar to the Mini, which is narrower and broader and may hit store shelves as early as March.
But until a product is released, the news concerning the decrease in screen production will continue to drive a fair amount of speculation. It was broken to Reuters this morning by two confirmed but anonymous sources who are not considered authority to make any prediction about future demand or actual tablet sales. We’ll know how healthy Apple Inc. (NASDAQ:AAPL) is on Wednesday when the quarterly earnings report is released—and how big a bite stockholders will take of the property.
