But analyst T. Michael Walkley, still a Buy, thinks Apple is well positioned to ride out the shock.
From a note to clients that landed on my desktop Thursday morning:
Despite the near-term uncertain supply and demand environment for Apple’s hardware products, Apple is well-positioned to benefit from the long-term 5G investment cycle and anticipate recovering earnings in C2021 as 5G smartphones ramp. Further, Apple’s ecosystem approach, including an installed base that exceeds 1.5B devices globally, should continue to generate strong services revenue, and we expect the higher-margin services revenue growth to outpace total company growth.
Ahead of the COVID-19 shock to global economies, we were encouraged by the strong demand for the iPhone 11 lineup and believe Apple will maintain its market share leadership of premium-tier smartphones that could be bolstered by a 5G upgrade cycle with potentially improved consumer demand longer-term.
Apple has market share leading positions in wearables with Watch and AirPods, and both have recently had strong sales and growth momentum. With $99B in net cash, Apple has a strong balance sheet to continue to invest and support long-term growth…
As we struggle to determine the near-term smartphone market impact associated with the coronavirus—we anticipate a soft June quarter followed by improving trends… For C2021, we have modeled iPhone units of 183M versus our previous 218M estimate. We hope this estimate proves conservative as our new estimate is below 2019 iPhone unit sales. There is also the potential for a stronger snapback demand following potentially weak C2020 smartphone sales. While we anticipate the market should recover in the September quarter, we anticipate steadily improving trends versus the potential for a more V-shaped recovery. The impact of our lowered estimates results in us lowering ourC’20/C’21 EPS estimates from $14.09/$16.76 to $12.04/$14.97, and we reduce our price target from $345 to $300 accordingly.
Maintains Buy rating, lowers price target to $300 from $345.
My take: “Soft June followed by improving trends” is probably the best we can hope for.
Below: Updated target cut chart. And then there were nine….