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.