Apple Eyes $430 as Component Prices Improve

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AAPL: Apple logo
AAPL
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Source: Wikipedia

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According to a recent report, the pricing of various raw materials for mobile devices like memory, NAND flash memory and displays are improving. [1] This could provide a nice boost for Apple (NASDAQ:AAPL), which has been grappling with various supply related issues over the past few months. These issues included a shortage of both labor and material at its plants in China, and the Japanese earthquake squeezed suppliers leading to higher prices for many of Apple’s component suppliers (see Supply Chain Issues Resurface for Apple). Apple competes with Research in Motion (NASDAQ:RIMM), Nokia (NYSE:NOK) and Motorola Mobility (NYSE:MMI) in the smartphone market.

This is positive news for Apple as the company should benefit from higher gross margins in the short to medium-term, especially for its flagship product the iPhone. We estimate that the iPhone is the most valuable product for Apple accounting for more than 50% of our $430 price estimate for Apple stock, which is 20% ahead of the market price. With many analysts expecting Apple to roll out the iPhone 5 in September, improvements in the supply chain are certainly welcomed.

See our complete analysis for Apple stock here

Notes:
  1. Apple profits to benefit as memory, display pricing improves, AppleInsider citing Sterne Agee as the source, July 6th, 2011 []