Investors are getting a little jittery about the outlook for Apple iPhone sales.
Apple generates more than half of its revenue from the smartphones, without even counting the billions of dollars brought in by the App Store and the growing suite of iPhone-based services. And right now, there are worries that the combination of Covid-related manufacturing shutdowns in China, component shortages, and signs of softening in the consumer economy are putting current Street expectations for the iPhone at risk.
Apple shares have been left out from Wednesday's modest rally in tech shares. On Wednesday, the stock was up 0.11%, to $140.52, while the Nasdaq Composite had risen 1.51%. The stock is off about 21% so far this year.
One reason for Wednesday's weak performance is a Nikkei Asia story that says Apple's development schedule for iPhone 14, expected to arrive this fall, has been hampered by lockdowns in Shanghai. In reporting its March quarter results, Apple warned that revenue in the June quarter could take a hit of between $4 billion and $8 billion because of Shanghai-related problems with supplies.
The Nikkei article, citing "multiple sources with direct knowledge of the matter," says that the worst-case scenario could be delays in manufacturing the new phones.
Apple has a standing policy of not discussing unannounced products and production plans. It didn't immediately respond to a request for comment.
Meanwhile, Loop Capital analyst Ananda Baruah thinks Apple could scale back its production plans for iPhones this weekend. In a research note, he said that Wall Street estimates for iPhone sales in the June quarter could be too high by between 4 million and 6 million units and that he thinks estimates of the number sold in the March quarter overshot the real figure by 5 million.
Apple doesn't disclose unit sales of iPhones, so there isn't any way to know the actual number.
Baruah thinks that iPhone revenue for the June quarter could be at risk, but he also said consensus expectations for the September and December quarters could be too low. That's a reflection of his view that the Street is underestimating the average selling prices for the iPhone, as consumers opt for higher-end models with more memory capacity over cheaper models.
For the June quarter, Baruah sees Apple selling 41 million units at an average price of $920. The Wall Street consensus call is for 47 million units at an average price of $834, he wrote.
For all of calendar 2022, he predicted that Apple will sell 229 million phones for an average price of $927, while his peers, on average, see 242 million units at an average of $852. Baruah's call pencils out to $212 billion in revenue, above the Wall Street consensus for $206 billion.
Baruah maintained his Buy rating on the stock with a target of $180 for the price.