COVID iPhone delays won’t destroy demand, but will push it into 2023
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Apple’s discount iPhone 14 Morgan Stanley says production at the Foxconn plant in Zhengzhou will hurt revenue for the holiday quarter, but also provide an opportunity for investors to “buy the dip”.
COVID-19 restrictions affect Zhengzhou Factorythe largest Apple Inc Iphone production facility, will reduce production line production in the near future. Enough effect that Apple released a file press release On Sunday he warned of low supplies but still high demand for it iPhone 14 Pro Models.
On a note to investors that he sees Camel, Morgan Stanley explains that the situation is not so bad for those who have bought into the company. Events at the plant and their aftermath are still “fluid,” but analysts see it as a “delay – not destruction – of demand.”
With the iPhone 14 Pro and Pro Max target inventory low and robust delivery times, Morgan Stanley believes it’s a “supply issue, not a demand issue.” The problem is “putting off the iPhone order” to a later time, instead of dealing with it right away.
As a result, the company lowered its revenue forecast for the quarter ending in December by $6 billion. However, the $4.3 billion will be “conservatively shifted” to the next quarter of March.
Investors may not believe in this delay, with Morgan Stanley insisting that “the street is likely to be overly conservative in assuming how much iPhone demand Apple can make up in the 23rd quarter of March”. Analysts say they will be “systematic buyers of the stock,” given the current situation, but it still requires careful monitoring of the ever-changing situation.
The memo then notes the initial stages of the COVID pandemic, with analysts cutting their March quarter forecast by 5% to 8%, but then Apple outperforming S&P by 10% to 20% in the next three to five months, beating expectations. “We believe a similar setup may be on hand,” the analysts add.
The Morgan Stanley team covering devices in Greater China expects to manufacture 43 million iPhone 14 Pro and Pro Max units in the December quarter out of a total of 85 million iPhones. However, analysts assume production of the two models is “virtually zero” for two weeks before returning on November 21, while Foxconn facilities in Shenzhen and Taiyuan will help make up for lost time.
Overall, analysts believe Apple will see a net decline of 6 million in shipments this quarter, reducing the quarter’s production to 78.5 million in total. Assuming 4 million units will carry over into March, this quarter’s number grew to 56.5 million iPhones.
Apple’s first-quarter revenue is now expected to be $123.4 billion, with a gross margin of 42.6% and earnings per share of $1.96. These are below $129.2 billion, 43%, and $2.11, respectively.
Morgan Stanley rated Apple as “obese” with a price target of $175.
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