Congratulations to Apple Inc. (AAPL) shareholders! Apple stock was in need of some plausible hope for the near future, and it found it yesterday.
Thanks to encouraging news — the consumer technology company told its suppliers to plan to make components for more iPhones this year than initially projected — AAPL stock was up a healthy 1.4% yesterday, while the broad market stayed flat.
On the flipside, if there was ever a company that saw rumors about it turn into the accepted truth — regardless of whether the rumors were true — it’s Apple.
Fans and followers may want to take the “news” with a grain of salt, and bear in mind the company (1) doesn’t confirm or deny such speculations, and (2) has changed its mind before in terms of how many iPhones it needed made.
More iPhones Please!
Taiwan newspaper Economic Daily first floated the idea, reporting Apple told its component suppliers it needs between 72 million and 78 million iPhones made to meet demand for the foreseeable future. That number would be a two-year best.
The iPhone in question is presumed to be the iPhone 7, which is due to debut in September if the company sticks to its usual iPhone launch calendar. Wall Street had only been anticipating orders for 65 million units, with reports of a significant lull in demand for iPhone parts and pieces circulating less than two weeks ago.
There’s understandable reason to believe the optimistic rumors. One of them is the likely technological leap the iPhone 7 is said to make.
One chief concern owners of Apple stock had voiced more than once is the seemingly small (and shrinking) differences from one generation of the iPhone to the next. That challenge was only exacerbated by theories that the would-be iPhone market is nearing saturation, as “good enough” iPhones are being held for longer periods rather than being upgraded to newer versions.
That could change, however, if the buzz about the design of the iPhone 7 is on target.
No less a rumor than the number of iPhones Apple has ordered, the alleged “Pro” version of the iPhone 7 may have a dual lens camera, which may in turn mean an optical zoom is available.
The new Pro version is also said to come with a so-called Smart Connector that will allow the lightning port to power attached devices as well as send and deliver digital data. That would be a significant improvement in the functionality of the device.
Not a Firm Commitment
While the premise is compelling, owners of Apple stock may want to keep in mind that not only are the ramped-up numbers an unconfirmed rumor, but also they’re not a commitment from Apple. The company has recently dialed back its orders.
The most recent instance of lowered orders was January of this year, underscoring a theory that Credit Suisse first offered in November. The company did the same in January 2013, paring back its need for the iPhone 5 — by as much as 50% — when the notion of a market saturated by low-cost comparable smartphones first took shape.
Saturation couldn’t have been that debilitating though, as the iPhone 6s sold in record-breaking numbers just a couple of years later.
Point being, with order-reductions being logged in recently just as often as heroic sales projections have been made, such rumors are relatively worthless to investors. Traders sure love them though, as they create volatility that sets up sizable short-term swings.
Bottom Line for Apple Stock
While AAPL stock manages to travel the full extent of its trading range on a regular basis, it has been speculation far more than actual news from the company doing that driving. That’s not apt to change now, as traders are ready to be receptive to some positive news after a bearish 12-month dry spell.
Either way, for investors willing to take a step back and look at a multi-year chart of Apple shares, it becomes clear AAPL stock has been worth owning far more often than not, regardless of the rumors.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
