Tuesday, February 18, 2020

Apple's Coronavirus Statement: Analysts React (AAPL)

From Markets not Live at FT Alphaville:
What can we possibly add on Apple’s coronavirus warning that has not already been written? Nothing, of course. And how many search hits would we lose if we didn’t mention Apple and coronavirus at least a couple of times in the first few paragraphs? Enough to justify this laboured intro, unfortunately.

So. Toy maker Apple warned overnight that Covid-19 has been affecting both supply and demand. Prior revenue guidance for the second quarter of $63bn to $67bn won’t be met given constrained iPhone supplies and Chinese consumers having things to worry about other than whether their handset has a slo-mo selfie mode.

Important to note they’re delayed sales, though. Full-year guidance unchanged. Apple assumes the Chinese consumer will become fatuous again, and that whatever revenue lost in Q2 will move to the second half. On the supply side, strong global iPhone demand (ex-China) translates into three weeks of iPhone channel inventory remaining at the end of the March quarter, versus the normal six weeks.
Raymond James cares so little it won’t even do new quarterly forecasts:
If this were a thesis-changing event that would affect out-year estimates, we would be more inclined to take a guess about the impact. But we don’t consider this to be thesis-changing, but rather to be transitory. Since this is occurring at the seasonally weakest time of the year for Apple, it minimizes the effect of lost China demand, and it also makes it easier to catch up on lost production since production facilities don’t generally operate at full production at this time of year. And as long as production facilities have returned to normal by about the June timeframe, we wouldn’t expect this issue to have any effect on the upcoming 5G iPhone cycle, and would therefore expect this to have zero impact on out-year estimates.
Morgan Stanley puts in a little more work, guessing at a $7.5bn shortfall to make up before the year end....MORE
Mr. Elder also includes a handy table of IT hardware names and their China exposure.

Capital Markets: "Apple's Warning Weighs on Sentiment"