Apple (NASDAQ:AAPL) has certainly delivered big to its shareholders, with the company's shares up over 40% year to date and close to all-time highs. This performance has been due not only to very strong underlying business performance, but to a very generous capital return program (which you can read more about here in fellow Fool Evan Niu's excellent piece).
However, in order for Apple stock to push through its 52-week high of $119.75 and print fresh new highs in the new year, there's one thing I think needs to happen.
Sustained iPhone 6 momentum
I don't think there's any doubt that the iPhone 6 and the iPhone 6 Plus are hugely popular devices. The company was able to sell 10 million iPhone 6 and iPhone 6 Plus devices in the first weekend alone.
Indeed, as seems to be custom each year, Apple reported a significant supply/demand imbalance on its most recent earnings call. Additionally, CEO Tim Cook was frank, stating he didn't know whether Apple would be able to exit the current quarter in supply to-demand balance for the new iPhones.
What I would like to see, though, is sustained demand for the device following what is likely to be a monster quarter for Apple in subsequent quarters.
Morgan Stanley's Katy Huberty seems optimistic
According to a recent note from Morgan Stanley's Katy Huberty (via Barron's), the buy-side (in other words, institutional investors) expects Apple to sell iPhone unit volumes numbering in the "mid-60 [million] or above range." Huberty also reports that the supply chain is building 65 to 70 million during the current quarter.
Interestingly enough, Huberty points out that this situation implies Apple will need replenish the channel with inventory in later quarters. Further, Huberty notes that because Apple announced it plans to increase its channel inventory target to 5-7 weeks (up from 4-6 weeks), and because Apple reportedly entered the current quarter below that 4-6 week target, "inventory replenish could add about 7M units on top of end demand."
Interestingly enough, there's another data point that seems to suggest iPhone demand could stay strong into the next quarter.
Remember what Avago said?
Avago Technologies (NASDAQ:AVGO), which iFixit revealed to supply chips into Apple's latest iPhone 6/6 Plus phones, reported that it will see "sustained demand from a large North American smartphone OEM" during its fiscal first quarter -- something that led CNBC's Jim Cramer to recommend buying Apple stock. Keep in mind that there is a delay between when a supplier recognizes revenue from a component sold to Apple and when those iPhones are built and ultimately generate revenue for Apple.
If a key iPhone 6/6 Plus component supplier is expecting demand for its iPhone-bound chips to remain strong during the first quarter, then this likely means iPhone 6/6 Plus sales should continue to show strength for quite some time as there is lead time between when Avago delivers product to Apple and when Apple recognizes revenue for those products.
There's meaningful evidence that iPhone revenues should stay strong in the coming quarter, even after the initial surge in demand likely seen in Apple's current quarter. All of this could which could mean great things for long term investors in Apple stock.
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.