"As of now we believe iPhone demand is holding up slightly better than expected."
From a note to Wedbush clients that landed on my desktop Tuesday:
The albatross for the June quarter in our investor conversations over the past few weeks have naturally been the Covid lockdowns in China which will negatively impact revenue by between $4 billion and $8 billion as a headwind according to Cook & Co.'s guidance given last month. As of now we believe iPhone demand is holding up slightly better than expected (despite the various supply issues that have plagued Apple and the rest of the tech sector). That said, the Street is well aware of weakness this quarter and we believe ultimately is looking past June numbers to the September and December quarters with all eyes on the iPhone 14 production/demand cycle for the Fall.
So far iPhone demand holding up well despite the fears. The China issues and supply chain should be peak worry in the June quarter and then subside into the key September/December quarters on the heels of a new iPhone 14 launch. We believe the initial bogey and production plans for iPhone 14 should be up flat to slightly higher from iPhone 13 out of the gates which speaks to Apple's confidence that pent up demand for this next release remain healthy despite the jittery macro. We estimate that Apple has gained roughly 300 bps of market share in the key China region over the last 12 months on the heels of its 5G iPhone 12/iPhone 13 product cycle with iPhone 14 adding to these gains looking ahead...
Services looks strong into the rest of 2022/2023. With Apple's services business set to be roughly $80 billion of annual revenues this year and set to grow at a steady "double digit" clip into 2023, we believe this key revenue stream remains at the epicenter of Apple's multiple and growth story during this market storm. On a growth and EBITDA basis, we believe Apple's services business is worth alone north of $1 trillion which coupled with the flagship hardware business makes the risk/reward very compelling at current levels.
Maintains Outperform rating and $200 target.
My take: Now that Evercore's Amit Daryanani and Loop Capitol's Ananda Barauh have lowered their price targets to $180 (from $210), only Wells Fargo's Aaron Rackers, at $205, stands between Ives and the market-high Apple price target.