Apple: Wedbush’s Daniel Ives is a little freaked out

A coronavirus caution from one of Apple’s most dependable cheerleaders.

From a note to clients that landed on my desktop Sunday:

Let’s not sugarcoat it: if true (still not confirmed), this production news out of China over the weekend will be a shock to the system and disrupt the supply chain further for Apple on both its core iPhone franchise and AirPods unit production, which is already facing a short supply heading into this week. On the retail front, Apple has now extended delays of its 40+ stores throughout China until February 15 due to the coronavirus fears that were also supposed to open tomorrow.

What does this mean for numbers? …[B]ased on our analysis and putting goal posts around this fluid situation, we believe the average store usually carries at least 5-6 weeks of inventory historically, so we view from a store/online channel perspective globally that for every week longer Foxconn is off production could remove ~1 million iPhones from our quarterly forecast due to supply chain constraints looking forward. While Apple does not provide unit sales/ASPs anymore for iPhones from a disclosure perspective, we are currently estimating roughly 44 million iPhones in the quarter and now are looking at downside risks of roughly 3-5 million iPhones pushing from the March to June quarter IF the production/ supply chain issues last another 2-3 weeks or longer until full production resumes at its core Foxconn plant…

For the stock, we view this more as a timing issue from March to June rather than lost iPhones for the year and thus our bullish longer-term 5G super cycle thesis remains well intact.

Maintains Outperform rating. Doesn’t mention his Street-high $400 price target.

My take: Seeing Ives like this freaks me out a little. A week ago he was a buyer on Apple weakness.

See also: Apple 3.0’s Wuhan coronavirus archives.

14 Comments

  1. Gregg Thurman said:

    Scare story #2. Not worthy of comment.

    2
    February 9, 2020
  2. Fred Stein said:

    The Apple growth story remains intact. Smart investors bet on 5 years of growth, buy backs, and dividend increases. all backed up by Apple’s continued stream of innovations and unshakable customer loyalty.

    That said, the market for AAPL and the market as a whole and the global impact of a disease we don’t yet understand defy prediction.

    3
    February 9, 2020
    • Dan Scropos said:

      Not to mention the subscriptions numbers are mesmerizing. 480 million as of now, and they expect to eclipse 600 million by year’s end.

      1
      February 9, 2020
  3. Robert McDonald said:

    Apple Insider has a new post from Ming-Chi Kuo today. He has “in’s” inside China that others don’t but also has a mixed track record on accuracy as some of you know. Kuo believes “that Apple’s Zhengzhou site is the most critical iPhone production site, and is responsible for the bulk of the iPhone 11 and iPhone 11 Pro assemblies. It isn’t clear when the factory will open, and Kuo thinks that the labor return rate will be between 40% and 60% of what the factory will need for full production.”

    https://appleinsider.com/articles/20/02/09/foxconn-moving-iphone-production-to-combat-coronavirus-production-loss-says-ming-chi-kuo/amp/

    0
    February 9, 2020
  4. Robert McDonald said:

    Even Pegatron is affected and India is not up to speed on advanced iPhones. Apples choices are limited.

    0
    February 9, 2020
  5. Jerry Doyle said:

    Apple is a $400 stock. We will be there late January 2021 when Tim C & Luca Maestri report results from 1Q 2021, if not before that target date. In the interim, any dips or pullback in the stock price is a no brainer: buy more shares if you have discretionary funds to do so.

    3
    February 9, 2020
  6. Aaron Belich said:

    What was I saying about pump and dump, supercycle BS!?

    Just last Friday PED’s clip of him blathering on about the pump… and 72 hours later he is setting up for the dump.

    Traders can DIAF. Though what I really mean is I need to learn how to make money when stocks go down out of fear.

    0
    February 10, 2020
    • Gregg Thurman said:

      Put options. But with an equity like AAPL, that rebounds rapidly after an initial scare, I’d be a Call buyer when I feel the fear has bottomed (make money on its way back up).

      0
      February 10, 2020
  7. Robert McDonald said:

    The conditions on the quarantined Caribbean Cruise liner in Tokyo Bay are similar to the dorm situation at Foxconn factories and others in China. There is the reason the Chinese government is taking a go slow approach on factory reopenings, Foxconn included. This is going to a long slow process measured in months not weeks before China factories are going Be back 100% and in the meantime the world is about to find out how dependent it is on China manufactured parts and product.

    https://www.washingtonpost.com/health/cruise-ship-coronavirus-infections-double-exceeding-the-total-for-any-country-but-china/2020/02/10/20d298ca-4c3a-11ea-b721-9f4cdc90bc1c_story.html

    0
    February 10, 2020
  8. Robert McDonald said:

    I agree Apple is a long term investment but if you have significant holdings in a tax protected account like an IRA like I do, why ride a 10-20% dip if you can tax free sell and rebuy as the recovery occurs in a few months.
    I will say I will continue to hold Apple in my taxable accounts to avoid the taxes on the significant capital gain that I have accumulated.

    0
    February 10, 2020

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