Using Apple Suppliers' Results, Wells Fargo Sees iPhone Sales Increasing

Analysts and investors aren't sure if Apple Inc. AAPL will see sales of its iPhone devices surge or plummet over the next year.

The investment community is concerned that Apple's next iPhone release, the iPhone 7, won't provide many users with sufficient reason to upgrade their older device.

Maynard Um, a senior analyst at Wells Fargo, thinks this assumption is false and iPhone shipments will increase year-over-year in December 2016.

Um reached this conclusion by taking a closer look at many of Apple's key members of its supply chain. Specifically, Skyworks Solutions Inc SWKS already guided its September quarter revenue growth to be 10 to 11 percent which is "solid." However, it's "difficult to distill" if the outlook is being driven by Apple or some of the firm's other clients.

Related Link: June Smartphone Survey Shows Apple's iPhone 7 Might Perform Like iPhone 6

On the other hand, Skyworks' management noted that all of its inventory consist of raw materials or work in progress, which suggests "the company is building for something, and not caught with prior cycle inventory."

Um also pointed out that Skyworks' management team established a track record of reporting its September quarter revenue above its guidance which may suggest there is "some conservatism" in its latest outlook.

Beyond Skyworks, Um added that QUALCOMM, Inc. QCOM Mobile Station Modem units guidance "appeared to be modestly better."

Bottom line, Um stated his research into Apple's key supply chain members isn't necessarily "poundingly conclusive" but does suggest "decent iPhone 7 builds."

Shares of Apple remain Market Weight rated with a valuation range of $115 to $125 per share.