Why is Product Shortage Great News For Apple?

Severe supply constraints for the company end up proving to be a big positive for Apple’s (NASDAQ:AAPL) stock price, an analyst has found. According to Evercore Partners’ Rob Cihra, over the last three years Apple’s stock has performed 2.2 times better in a quarter when the company expressed concerns that the supply of the iPhone was constrained. The stock also performed 1.2 times better when the company’s management said the iPad was constrained.

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Incredibly, when both the iPhone and iPad were noted as constrained by Apple executives in the June 2010 quarter, the company’s stock price grew 26 percent over the next three months. In October last year, when Apple did not report any such issues, the stock stayed flat.

According to Cihra, product supply constraints usually result in investors realizing that customers are prepared to wait for the Apple product rather than buy an alternate one. In addition, if supply exceeds demand, it helps investors predict the number likely to reach if Apple were to meet supply.

The analyst believes Apple could see supply issues of the new in-cell touch panels as well as 28-nanometer basebands from Qualcomm (NASDAQ:QCOM) until at least December.

Evercore increased its price target on the stock to $800 from $750 and maintained its Overweight rating for the company.

Cihra also predicted iPhone unit sales of 24 million in the September quarter, a 39 percent year over year growth. For the holiday quarter, Cihra forecasts iPhone unit sales of 49 million, which, if it comes true, would be a new record for the company.

Read Is Apple a BUY at $670? to find out if Apple is the right stock for you.