Apple: Oppenheimer and Barclays have cold feet

From Emily Bary's "Apple faces risk of ‘perishable demand’ for iPhones, analysts say" posted Monday by MarketWatch:

“We see perishable demand stemming from the Zhengzhou Foxconn plant disruption, instead of an outright production deferral” to the March quarter, Barclays analyst Tim Long wrote in a note to clients Sunday.

His industry conversations indicate that utilization at the Zhengzhou plant is now up to 30%, from 20% at the end of November, but his “base case is that utilization won’t return to normal until sometime [in] late January, at the earliest.”

Long rates the stock at equal weight with a $144 price target.

Oppenheimer analyst Martin Yang has an outperform rating on Apple’s stock, but he lowered his price target to $170 from $190 on concerns related to the production constraints. The price-target cut comes in conjunction with a reduction in his fiscal 2023 estimates that stems, he said, from “later-than-expected iPhone production capacity recovery in China.”

Barclays maintains Equal Weight rating and $144 target (it was $166 last I heard).

Oppenheimer maintains Outperform rating and cuts target to $170 from $190.

My take: These are not the only nervous sell-side analysts ("nervous sellies"?) we'll hear from before the quarter is out.

14 Comments

  1. David Emery said:
    I’d be -really interested to know- how many ANALysts are carrying Androids, or how many plan to switch to Android. Yeah, I’m implying that ANALysts are asserting behaviors to “the market” that they themselves wouldn’t exhibit.

    4
    December 12, 2022
  2. Daniel Epstein said:
    Well maybe many people will give up waiting for the Iphone 14 Pro and move to a knock off like the Xiaomi 13 whose design is called an Iphone knock off according to 9 to 5 Mac. These worries without proof are common among Apple Analysts. They heard there is a problem and now imagine the worst outcome is the base case. And if they end up being somewhat correct they don’t have egg on their faces. No one will call them out strongly if they are incorrect. Kind of like people saying the phone costs over a thousand dollars so sales should slow because of the coming. recession. Whenever that actually is. Well I would bet most people don’t pay for the phone upfront but over time so it is really not such a big deal for something they use many hours a day.
    There is an interesting article on 9 to 5 Mac which shows how Iphone sales are apportioned between Apple Stores, carrier stores and electronics stores in the US. Surprising to some the carrier stores lead in volume. This should make sense as there are many more outlets for sales by carrier than by Apple Stores. And often there are better deals from the Carriers. These deals aren’t based on how long the lead time is on the phone delivery so demand may be more related to that than when the phone actually arrives.

    3
    December 12, 2022
    • Jerry Doyle said:
      @Daniel Epstein: I just ran a purchase for an iPhone 14 Pro, 256 GB, Space Black. Estimated delivery, January 5. That is 24 days including two holiday days of Christmas and New Years. Essentially, we are looking at a three week delivery time excluding the two holidays. That does not seem to be an excessive period to warrant a connotation, “perishable demand.” I did not run simulations on other models.

      In summary, Oppenheimer & Barclays’ analysts seem to be overreacting. Additionally, with production ramping up I only can assume logically that the three week period will truncate.

      2
      December 12, 2022
      • Daniel Epstein said:
        Jerry I hope you are representative of Apple’s customer base. Hard to generalize from a single story. I agree the “perishable demand” idea has weaknesses and feels like a typical Apple is doomed kind of story. Because most people only buy a phone to use between Christmas and New Year’s. After that they would easily not care what kind of phone they use. I consider how long I have been waiting to buy an Apple car before I trade in my 1998 Plymouth Voyager as atypical of Apple customers.

        0
        December 12, 2022
  3. Brian Loftus said:
    If he is right that production is only 30% – then with shrinking lead times- Apple is in trouble. On the other hand, with sudden shortening of lead times of 7 days over 7 days – that implies either 0 new orders or an increase in production. I vote the later.

    2
    December 12, 2022
    • David Drinkwater said:
      My question is: 30% of what metric? Without understanding the denominator, the numerator is useless.

      30% of total manufacturing capacity? Sounds good, for just one customer.

      30% of what Apple is requesting?
      Not ideal.

      30% of “what we were expecting“?
      Completely useless.

      Pffffff.

      1
      December 12, 2022
  4. Gregg Thurman said:
    When I calculate WS consuls I don’t use Oppenheimer’s or Barclay’s targets, because traditionally theirs are outliers to the low side.

    4
    December 12, 2022
  5. Ken Cheng said:
    Just looked at TipRanks and Tim Long has had a “HOLD” on Apple since Nov 1, 2018. He’s never had any other position. I counted he had re-iterated his HOLD at least 30x since then.

    5
    December 12, 2022
    • Mark Visnic said:
      Long hails from the broken clock school of sell-side analysis, not to be confused with the broken sundial school of sell-side analysts favored by Goldman’s Hall.

      By the way, did anyone hear Cramer saying AAPL needed to go to $120?

      3
      December 12, 2022
  6. Mark Visnic said:
    Cramer: So where else will the money come from? Unlike the chimerical trillions that vanished into thin crypto air, the fuel will come from four stocks that have a combined total of $6 trillion to donate: Apple
    (AAPL), Microsoft
    (MSFT), Alphabet
    (GOOGL) and Amazon
    (AMZN). There is simply too much money in these names to take us higher, or at least how high we can go after the Federal Reserve’s next meeting this week. But I think some of that investor money will be transferred into the stocks of companies that have the most voracious buybacks. Those are the companies without enough stock available to handle all the money that will flood in.

    Money in those four stocks will be pulled out, kicking and screaming, until the valuations become earthly — better than Meta Platforms
    (META) and more like the S&P
    as they are revealed to be mortal. Not until then can the rally start in earnest. Can these valuations be played out? It’s happening as you read this.

    Of course, there’s one other enemy to the advance and it’s a powerful one: The 4.5% yield from 2-year Treasurys is outrageously bountiful in a market where anything north of 4% in equities is likely tied to plummeting oil. However, we cling to the oils, betting that they can maintain their well above market prices when Russia can’t produce its endless reserves and China goes voracious upon reopening. I think we will win.

    Bottom line

    We will hold Apple, Microsoft, Alphabet and Amazon, even as we’ve trimmed them higher. Their spiral down to earth, however, will be painful. If we hadn’t sold some, it would be getting late in the game. But I suspect there’s more pain to come. Why take it? Because these companies still have value, even though it won’t surface until the selling’s done and we don’t know when that will occur. It’s too dangerous now to depart, although Apple could see $120 and Microsoft a 10-point decline. Amazon and Alphabet control their own destinies through headcount reductions.

    The good news? The selling could end after the Fed meeting. The bad news: If it does, there will not be enough rocket fuel. The big four need to shed a trillion minimum to power things higher. I think it will happen in time. Which would mean a brutal week until the transfer begins to be made. Hold on to what you have, but get ready to be lifted by the stocks with the strongest buybacks. That’s where the accumulation will matter the most.

    0
    December 12, 2022
  7. Bart Yee said:
    Cramer has a point. A lot of money has pretty much evaporated in the crypto meltdowns over the past year. That’s money that was not in the market and now never will be recovered by most holders. I count at least $500B in outright losses, and since late 2021, $2 Trillion has been paper losses. I can’t say any of this had been in the market in the last year at all.

    Otherwise, the real question is where is all the mutual fund, passive Index fund, and managed fund cash that was pulled out over the last 6-8 months since the war/Inflation and rate hikes began? Certainly there were major losses all year by most active funds.

    0
    December 12, 2022
  8. Michael Goldfeder said:
    When talking of crypto currencies, aren’t they more perishable than ice cream on a hot day? They just didn’t go into a ditch. They evaporated faster than the speed of light. Don’t get me started on the other rat poison; NFT’s.

    As for: “We see perishable demand stemming from the Zhengzhou Foxconn plant disruption..” What company and product are stepping into that void and taking those sales away from Apple? Does this dolt truly believe that some teenager anywhere on planet earth is going to want anything other than an iPhone? They won’t wait another week or two. Or three?

    This is all hysteria on steroids. It’s also as silly as saying since Nike can’t get their orders for “Air Jordans” out of some plant probably also in China, that now everyone is going to be wearing “Buster Brown’s” and “Hush Puppies” because those “Air Jordan” orders are now perishable!

    At least try to write something that has a modicum of truth to it as opposed to fear mongering that is totally asinine.

    3
    December 13, 2022

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