Investors are a bit worried about the outlook for
Apple (ticker: AAPL) generates more than half of its revenue from smartphones, not even counting the billions of dollars contributed by the App Store and the growing suite of iPhone-based services. And right now, there are fears that the combination of Covid-related manufacturing shutdowns in China, component shortages and signs of a slowing consumer economy could jeopardize Street’s current expectations for the iPhone.
Apple shares were left out of Wednesday’s modest rally in tech stocks. They are one of a handful of large-cap tech stocks that are trading in the red. Around noon, the stock was down 0.4%, at $139.82, while the
increased by 0.5%. The stock is down about 21% so far this year.
One of the reasons for Wednesday’s weak performance is a Nikkei Asia story that says Apple’s development schedule for the iPhone 14, which is expected to arrive this fall, has been hampered by lockdowns in Shanghai amid China’s zero-Covid policy. In its March quarter earnings release, Apple warned that June quarter revenue could be hit between $4 billion and $8 billion due to Shanghai-related supply issues.
The Nikkei article, citing “several sources with direct knowledge of the matter”, says the worst-case scenario could be delays in the manufacturing of the new phones.
Apple has a permanent policy of not discussing unannounced products and production plans. He did not immediately respond to a request for comment.
Meanwhile, Loop Capital analyst Ananda Baruah thinks Apple could scale back its iPhone production plans this weekend. In a research note, he said Wall Street estimates for iPhone sales in the June quarter may be too high by 4-6 million units and that he believes estimates of the number sold in the March quarter exceeded the actual figure of 5 million. .
Apple doesn’t disclose unit sales of iPhones, so there’s no way to know the actual number.
Baruah thinks iPhone revenue for the June quarter could be at risk, but he also said consensus expectations for the September and December quarters could be too low. This reflects his view that the street underestimates average iPhone retail prices as consumers opt for higher-end models with more memory capacity than cheaper models.
For the June quarter, Baruah sees Apple selling 41 million units at an average price of $920. Wall Street’s consensus call is for 47 million units at an average price of $834, he wrote.
For the entire 2022 calendar, he predicted that Apple will sell 229 million phones for an average price of $927, while its peers, on average, see 242 million units at an average of $852. Baruah’s call comes in at $212 billion in revenue, above the Wall Street consensus for $206 billion.
Baruah maintained its buy rating on the stock with a price target of $180.
Write to Eric J. Savitz at [email protected]