Thursday, March 17, 2011

Focus on Demand, Not Supply

A recent analyst downgrade of Apple stock due to concern over potential supply slowdowns prompted one well-known Apple watcher to warn against focusing on the wrong factors. “Calls based on supply-side concerns have led investors astray, but demand for Apple’s products continue to rise,” Piper Jaffray’s Gene Munster told investors Thursday morning.
Despite the temporary shutdown of some key component manufacturers due to Japan’s recovery efforts, both steady demand for Apple products and the Cupertino, Calif. firm’s earlier contracts to ensure parts, will lessen any impact. “Which should move share higher,” Munster said.
He noted there will be “component delays for some of Apple’s key products including iPhone 4 and iPad 2 through the June quarter.” Among the potential sticking points: Mitsubishi Gas Chemical Co., maker of Bismaleimide Triazine Resin (also known as “BT Resin”) is shutting down production until damage is assessed. Toshiba, which makes 40 percent of NAND flash chips – heavily used by Apple – is also stopping production.
Munster is the latest to refute a Wednesday report by JMP Securities analyst Alex Guana connecting a slowdown at Apple supplier Foxconn with potential supply problems for Apple. The accompanied downgrade – the first since October 2010 – sent Apple stock lower before recovering Thursday morning.

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