Iphone delays weigh on Apple ahead of holiday season
Wait times for Apple Inc.'s most expensive smartphones are rising to what analysts say are record levels as the holiday shopping season kicks off, threatening to curb sales at the company's busiest time of year and derail a rally in the stock.
Customers in the U.S. who placed an order Tuesday would get an iphone 14 Pro delivered in New York on Dec. 30, after Christmas, according to Apple's website. The wait was about 34 days as of last week, near the highest ever, according to UBS Group AG.
The delays, resulting from COVID lockdowns around a Chinese plant run by a contract manufacturer of iphones, could cause analysts to trim their earnings estimates for this quarter, which accounts for 35 per cent to 40 per cent of iphone unit sales. That in turn could further pressure Apple's stock price, which has been a relative haven in this year's tech meltdown.
“This could cause some further headwinds for Apple,” said Matt Maley, chief market strategist at Miller Tabak + Co. Consumers' finances are stretched because of rising food and energy prices, which “will almost certainly cause the consumer to pull in their horns after the holidays. If that is the case, it's going to be tough for Apple to make up any lost holiday sales next year.”
An Apple spokesman said he didn't have any immediate comment on the wait times.
If wait times don't improve over the coming weeks, unit sales could miss estimates, resulting in iphone revenue coming in flat year-over-year instead of rising by about two per cent as expected by analysts, according to UBS'S David Vogt.
Jefferies analyst Kyle Mcnealy assumes about three weeks of disruptions and estimates that each week of lockdown at the China plant will cut US$1 billion from revenue and 1 cent from earnings per share. Evercore ISI'S Amit Daryanani estimates that this could push out about US$3 billion of iphone revenue into the March quarter.
For bulls, that might be the bestcase outcome. “We don't believe those will be necessarily lost orders,” said Mark Stoeckle, Adams Funds' chief executive. “We think they'll be delayed orders.”
The disruptions forced Apple to provide a rare update only 10 days after the Cupertino, Calif.-based company reported its fiscal fourth-quarter earnings at the end of October. It said shipments of the new premium iphones will be lower than expected because of the lockdowns.
“Apple relative to the other names still offers safety,” said Lewis Grant, senior portfolio manager at Federated Hermes Ltd. Grant said he takes solace in the fact that Apple isn't entirely reliant on hardware, since the company can tap into a stream of recurring revenue from subscriptions to services such as Apple Music and Apple Arcade for video games.