While some of its mega cap peers have been able to somewhat harness the COVID-19 pandemic to their advantage, the same cannot be said of Apple (APPL). The coronavirus’ effect on the supply chain and attendant macro impact have put a spanner in the works for the tech giant, disrupting laid out plans for 2020.
The iPhone 12, Apple’s fanfare launch for 2020 – and first model to boast 5G capabilities – was originally slated for a fall release. But rumors have been circulating that due the pandemic and its impact on consumers’ spending power, the launch will go ahead later than originally expected.
Nomura’s Jeff Kvaal believes “the iPhone 12 is running four to six weeks behind plan.” Kvaal points out that the order changes are part of a wider revised plan for 2H20, which will amount to a “modest reduction in Apple’s build plans through calendar 2020.”
The 5-star analyst noted, “The mix is now skewed to the iPhone 11/SE models. Apple’s order reset could also be 1) part of Apple’s commitment to suppliers and 2) concern that the pandemic could mute sales of higher-priced 5G phones. We retain our cautious view of a 5G supercycle. Replacement rates lengthened during the (more clearly beneficial) 4G cycle, and operators are now more targeted in their promotions.”
Moreover, Kvaal expects further reductions, considering Apple’s history of cutting orders in phases. The analyst estimates the orders for CY20 will come in at 190 million, compared to the current estimates which suggest orders remains above 200 million.
As a result, Kvaal reiterated a Hold on Apple shares, along with a $240 price target. The figure implies downside of 14% from current levels. (To watch Kvaal’s track record, click here)
The Street, however, remains more upbeat. Apple’s Moderate Buy consensus rating is based on 28 Buys, 6 Holds and 3 Sells. The average price target comes in at $307.91 and could provide returns of 10%, should it be met over the coming months. (See Apple stock analysis on TipRanks)
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