China's Role In Upcoming Surging Apple Sales

Includes: AAPL, CHA, CHL, CHU
by: Emerging Money

By Mitchell Hall

The Apple (NASDAQ:AAPL) juggernaut keeps on rolling, with a surge in Apple sales for the iPhone 5 and new iPads expected this quarter and the next, according to Morgan Stanley analyst Katy Huberty.

Image courtesy Mike Lau:

Apple store in Guangdong, China

CNET reports that distributors are bullish on Apple sales for the iPhone 5 and the iPad Mini in China, particularly given the lower cost of the Mini relative to its more established, larger predecessor.

Along with Morgan Stanley, Gartner analysts are also bullish on the iPhone 5 launch in China this quarter, according to Apple Insider. The firm expects the holiday quarter will be Apple’s strongest, as it usually is for the company.

There are two other key developments looming for Apple in China.

The new government is expected to issue 4G LTE licences for the Chinese market in the second half of 2013. Observers are also praying that Apple can finally secure a distribution deal around the same time with China’s largest telco China Mobile (NYSE:CHL) to carry the iPhone. The two developments would unleash all the 4G phone’s gold standard features and presumably lead to a boom in Chinese Apple sales.

As a a consumer driven stock with dividend yield and potential Apple upside, China Mobile is a great way to play China. Apple already has distribution agreements with China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA), the second and third placed carriers.

CNET also notes that over the longer term, Apple will expand its retail stores and carrier distribution not only in China, but in Brazil and other emerging markets, according to Huberty.

Huberty said in an investor’s note out today that key suppliers for the iPhone 5 and iPad Mini say their revenue will be higher than anticipated for the current quarter. They’re also seeing above-average orders from Apple for next year’s first quarter.

Analysts expect 46 million iPhones and 23 million iPads to ship this quarter, with 43 million iPhones and 19 million iPads next quarter.

Making Apple stock even sweeter is the second installment of its dividend program today. The company will distribute $2.65 per share to its shareholders over 935 million outstanding shares, which will mean a $2.5 billion total payout, according to Apple Insider.

Apple is flush with $121.4 billion in cash and liquid assets on the books according to its most recent earnings report, and carries no debt.

Apple intends to spend $45 billion and regularly give shareholders $2.65 per share per quarter over the next three years, with its board also authorizing a $10 billion share repurchase program which began on September 30.

Gartner research yesterday showed Apple gaining share in the global mobile handset market, but losing share in the smartphone-specific market. Android (NASDAQ:GOOG) showed sharp gains however, according to Mac Observer, gaining 19.9 percentage points to claim 72.4% of the smartphone market.

Research In Motion (RIMM) saw a further acute decline from 11% to 5.3% of the smartphone market, but it remains in third place. Microsoft (NASDAQ:MSFT) went from 1.5% of the market to 2.4%, a 139% gain for the third quarter and the first gain Windows Phone has made in years.

In the broader feature phone handset market, Apple only gained share because the handset market shrank relative to 2011, while Apple sales of iPhones increased. Apple’s share of handset sales increased from 3.9% to 5.5%.