Analysts Analyze Apple Amidst Shenzhen Shutdown
16 MARCH 2022 - Apple analysts seem cautiously optimistic about Apple and iPhone production amidst the Shenzhen situation. We heard a few days ago that the government in China had put Shenzhen in lockdown due to a surge in COVID infections in the region. A piece from Apple Insider said then that:
With the exception of companies supplying food, fuel, and essential goods or services, all businesses were ordered to close or implement work-from-home policies. It is expected that the lockdown will persist until March 20 at the earliest.
That meant that Foxonn had to shut down its production facilities in Shenzhen, which got Apple watchers wondering what that would mean for Apple. Now, a few Apple analysts have opined on the subject.
Mr. Mohan Sees Cause for Concern
Expressing the most concern is BofA analyst Wamsi Mohan. To be clear, he expresses concern, not worry. At least, not yet. Seeking Alpha (via MacDailyNews) highlights his note on the issue. Basically, his level of concern rides on how long the lockdown persists. While most of Foxconn’s iPhone production happens in Zhengzhou, Shenzhen is still “a hub for a material part of the iPhone supply chain,” according to the analyst. The way he sees it:
Apple/Foxconn have the ability to relocate production to other areas in the short term provided that there is not a significantly higher duration of lockdown…
Mr. Mohan has a “Buy” rating on Apple shares. His price target on the shares is $215.
Amit and Harsh Stay Mellow
While Piper Sandler analyst Harsh Kumar and Evercore analyst Amit Daryanani are absolutely keeping eyes on the issue, theirs are not quite as jaundiced as our man Mohan’s. Apple 3.0 ran excerpts of notes from both analysts.
Piper’s Kumar points out that most of Foxconn’s iPhone production happens in Zhengzhou and Zhengzhou is not locked down. Plus, it’s a slow time of year for iPhone demand, and besides - iPhone buyers will wait. Quoting his note:
…we view iPhone demand as sticky, so consumers will wait to make their purchase until any supply impact is resolved. Overall, we do not see a significant impact to iPhone production/ supply due to the current lockdown situation in China.
I can’t help wondering how wild a wildcard the brand new iPhone SE might be. Yes, this time of year is usually a slow time for iPhone, but Apple’s latest budget-friendly phone (announced just last week) has already seen wait times slip to the end of the month. At the same time, people making the move from Android to iPhone by way of iPhone SE don’t know iPhone yet, and may not find it as worth the wait as people upgrading from an old iPhone.
For now, at least, Kumar’s not concerned. He’s got an “Overweight” rating on Apple shares. His price target on the shares is $200.
Saying basically the same things as Mr. Kumar, Evercore’s Daryanani says most of the iPhone production happens in Zhengzhou, not Shenzhen, and - slow time of year for iPhone demand. He’s got an “Outperform” rating on Apple shares and a price target of $210.
