Apple Supplier AAC Tech Sees No Slowdown, Morgan Stanley Raises TP By Shuli Ren
Apple’s (AAPL) acoustics supplier AAC Technology (2018.Hong Kong) can do well even if iPhone 7 disappoints in the fall.
AAC Tech will fare better than other Apple suppliers because of iPhone 7′s major acoustic platform upgrades.
“The main changes in iPhone 7 design lie in the receiver, which will be upgraded to be similar to the speaker function. The new design will increase the sound volume achievable from internal speakers and increase the quality of the audio,” noted Morgan Stanley analyst Jasmine Lu.
As a result, Morgan Stanley this morning raised AAC’s average sales price assumptions and its price target to 70 Hong Kong dollars, from HK$65 previously. AAC Tech jumped 3% to HK$56.25.
Investors are also worried that Apple has added a new supplier Japan’s Alps Electric (6770.Japan), in addition to Nidec (6594.Japan) and AAC, for its haptic functions. Don’t worry, wrote Lu:
Our checks suggest the impact will be much smaller than the market expects as:
1) Alps’ haptics capacity expansion plan is quite conservative this year, translating into only single digit share in 2H16;
2) likely lengthy learning curve for refreshed design; and
3) Jinlong will be excluded from iPhone 7 and will supply only Apple Watch.
Investors are looking favorably at AAC again this week. As of last Friday’s close, this stock rose only 2.7% this year.
Morgan Stanley’s price target implies 17.5 times their 2016 earnings estimate.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... raises-tp/
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