BofA calls BofS on Nikkei's Apple cutback report

"Media articles suggest order cuts; we see demand as strong." -- Analyst Wamsi Mohan

From a note to BofA Securities clients that landed on my desktop Wednesday:

Recent media articles suggest Apple plans to produce 20% fewer iPhone SE next quarter given weaker demand as a result of the war in Ukraine. The articles also suggest some order cuts (few million units) for the entire iPhone 13 range, and some order cuts for AirPods. While these articles might lead some investors to think there is risk to demand, we believe demand for iPhones remains strong based on our analysis of iPhone trade-in prices. Apple is offering trade-in values that are at a discount compared to 3rd parties in the U.S. and the UK.

Further, Apple recently reduced the trade-in prices for the majority of its models in the U.S., UK and China. In our opinion, lower Apple trade in prices vs 3rd parties and the reduction in overall iPhone trade-in prices signifies strong demand. This compares to the year 2019 when Apple was offering high trade-in prices vs 3rd parties to drive upgrades.

Separately, China has imposed another round of lockdowns in Shanghai; however, as we previously pointed out companies have learned to manufacture through COVID and Apple/Foxconn have the ability to relocate production to other areas and, as of now, we do not expect a material impact from these shutdowns. Reiterate Buy on multiple tailwinds on both hardware and services (user growth, ASP, and increased penetration of installed base).

Reiterates Buy rating and $215 price objective.

My take: The Street came to the same conclusion about Nikkei two days ago. Meanwhile, as Mohan points out, there are a lot of old phones out there crying to be upgraded. See BofA's Figure 6:

Click to enlarge. 


  1. Robert Stack said:
    Great headline PED! Though in your pic you focussed on the wrong end of Elsie! 😉

    March 30, 2022
  2. Dan Scropos said:
    Apple should report just north of $1.50 in 4 weeks and that will put this issue to rest.

    March 30, 2022
  3. Steven Philips said:
    Gee! This positive report is as good a reason as any for the stock to – drop!

    March 30, 2022
  4. Romeo A Esparrago Jr said:

    March 30, 2022
  5. Robert Paul Leitao said:
    Apple doesn’t upgrade products on a whim. As Mr. Mohan suggests, the recent media reports are at best inaccurate (and in my view somewhat nonsensical). It’s not about the device. It’s about the customer relationship. The new iPhone SE is primarily designed for those with older iPhone handsets seeking to upgrade and customers seeking to remain engaged with the eco-system at a comparatively lower price for a new iPhone. I appreciate BofA’s analysis in this report.

    March 30, 2022
  6. Don Donofrio said:
    I spent a few minutes taking a closer look at that chart. It is really a great set of data! I would like to know the survey size and method.

    Most interesting to me is that not only is the iPhone 11 the most popularly owned phone, its share of ownership is __growing__. It looks like the erosion in the iPhone 8 and below models is moving to the iPhone 11.

    March 30, 2022
  7. Jerry Doyle said:
    “…. Separately, China has imposed another round of lockdowns…”.

    I do wonder to the extent that the imposed, mandatory lockdowns in China may increase iPhone and other Apple hardware sales somewhat similarly to the shutdown in 2020.

    March 30, 2022

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