Yesterday, I took a step back and looked at three fundamental reasons for loving Apple stock (AAPL) – Get Free Report. Today, I get back to analyzing the company’s short-term prospects during this crucial 2022 holiday shopping season.
More specifically: how will a heavily supply-constrained iPhone perform on Black Friday weekend? Luckily, one Apple analyst has done the homework for us. Below, we discuss Wedbush’s views on the Thanksgiving weekend ahead for the Cupertino company.
Read also: 3 Big Reasons To Love Apple Stock
Apple to suffer on Black Friday
Analyst Dan Ives holds an outperform rating on Apple stock and price target of $200. His bullish views seem to be grounded more on the multi-year, cyclical trends in demand for the iPhone, and less on how near-term financial results may be impacted by supply challenges.
Still, he addresses the elephant in the room. According to Mr. Ives, Apple is in a state of “major shortage heading into the next month” due to the zero Covid-19 policies in China. The impact should definitely be felt over the next few days of shopping.
The Wedbush analyst sees iPhone sales over Black Friday weekend dropping by a sizable 20% YOY to 8 million units, as inventories remain depleted. He does not seem concerned, however, because:
“We are seeing strong iPhone upgrade activity through the likes of AT&T/Verizon and in store activity has been solid for Apple in most stores as well as the online channels.”
iPhone constrained, Apple adjusts strategy
I checked the availability for a “basic” iPhone Pro with 128 Mb in my local market on Apple.com – which is only a few miles away from Cupertino, California. What I saw shocked me. The device could not be picked up at the local store, and can only ship on January 3 of next year!
The bottom line is that, unless the supply situation improves quickly, any iPhone Pro purchased online starting today runs the risk of not being recognized as revenue on Apple’s books until next quarter. Those concerned about quarter-to-quarter performance should take note.
Something else caught my attention. On Apple’s home page (see image below), the iPhone is no longer featured “above the fold”. Instead, the Cupertino company seems to be:
- Promoting Apple TV+, a service that does not suffer from supply constraints;
- Offering a gift card incentive on the purchase of virtually any physical product EXCEPT the iPhone 14 – a product that Apple is having a hard time delivering anyway.
Apple investors: are you mostly (1) excited about the holiday season, as the iPhone 14 and other products seem to enjoy high consumer demand, or (2) worried about supply constraints in Asia and what it could mean for holiday quarter sales?
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)