If there is any tiny positive from Apple’s fresh iPhone production warning, it’s that recession fears haven’t stopped people from wanting $1,000 plus new models and waiting weeks to get them.
“Supply chain challenges have been frequent the last couple of years, and there is limited evidence that delays in shipping devices have had any impact on overall volumes for a product cycle (example: iPhone 12 or iPhone 13) over a multi-quarter period.” JP Morgan analyst Samik Chatterjee wrote.
Chatterjee explained that “within the hardware portfolio, we see the demand destructions from supply pushouts the least for the iPhone, as consumers are willing to wait for delivery; and would expect the delayed shipments to push out into F2Q23 (March-end) or later quarters.”
Apple surprised markets late Sunday with an announcement that COVID restrictions in Zhengzhou, China are impacting operations at iPhone 14 Pro and iPhone 14 Pro Max production sites.
Bloomberg reported that softening demand was also a factor, though the tech giant reiterated that demand remained robust.
“We continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models,” the statement said. “However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated.”
Apple stock fell 1% in pre-market trading on Monday.
JPM’s Chatterjee stayed with an Outperform rating on Apple with a $200 price target but warned there is heightened risk to Wall Street analyst estimates for the current quarter. He added the news is unlikely to suggest the latest suite of iPhones will under-perform expectations into 2023.
“We see upside in several aspects of the business as well as financials that remain underappreciated by investors, namely the transformation of the company to Services, growth in the installed base, technology leadership, and optionality around capital deployment — all of which together lead us to expect double-digit earnings growth and a modest re-rating for the shares,” Chatterjee wrote.