"This is some good news in what has been a horror show for Apple around iPhone production."
From a note to Wedbush clients that landed on my desktop Wednesday:
Last night China officially lifted the lockdown on Zhengzhou, also known commonly as iPhone city with Foxconn's main Apple production artery located in this key area. This is some good news in what has been a horror show for Apple around iPhone production, which has been operating at roughly 20%-30% of capacity over the past month in our opinion and is resulting in a massive unprecedented iPhone shortage globally heading into Christmas holidays for Cook & Co.
What started out a month ago as 3% iPhone 14 Pro shortages grew to 5% last week and now are roughly 10%+ of overall units with the potential to increase over the coming month depending on any production improvements from Foxconn.
We estimate demand vs. supply from consumers around iPhone 14 Pro are currently at a 3:1 ratio as many Apple stores, retailers, and online channels are looking empty handed for most iPhone 14 Pro models until at least early to mid January...
Now it's the painful waiting game to see what ramped production looks like over the next week for Apple to ease some iPhone shortages that are building globally. The Street will mostly look through this production disaster for Apple as a shift in iPhone timing and not penalize the stock to the full extent, however major strategic questions remain around the future of Apple's production in China.
Maintains Outperform rating and $200 price target.
My take: Ives is better at good news than bad.
“I don’t think the production delays are anywhere near what some sensationalized headlines suggest.”
Agree totally.
Assume Pro models drive about 80% of all iPhones which are now about 41% of all Apple revenue. The math .1 * .8 * .41 or 3.3% revenue moved to next Q. The profit impact would be slightly higher. Maybe Apple had to help Foxconn with employee bonuses.