Arguments Over iPhone Expectations

06 JULY 2022 - J.P. Morgan analyst Samik Chatterjee has lowered his expectations for Apple, though not his target and rating. Apple 3.0 ran part of a note he wrote late last week. Right now, he seems to think everything’s fine. A year from now, everything will be fine. But that middle bit - that’s an interesting place/time with a few voices in the mix. “…beyond the near quarter,” reads part of his note:

…the headwinds drive us to lower our revenue and earnings forecasts modestly, led by lower volume expectations (iPhone 14 expected to be modestly below iPhone 13) and escalating FX headwinds.

14 Fewer Than 13?

It’s that iPhone 14 demand issue that’s raising a few voices. Late last week, 9 to 5 Mac ran a highlight of a DigiTimes report that said Apple was cutting iPhone 14 orders by 10%. Not a surprise #InThisEconomy, except the issue isn’t demand. Rather, the piece says, the problem is components. According to 9 to 5 Mac:

The issue began when Apple’s supplier TSMC had three major customers adjust their orders, worsening the semiconductor situation. With the ongoing shortages, these customers couldn’t continue with business as usual.

Disbelieving of the DigiTimes story is TF International analyst Ming-Chi Kuo. Following word of the order reduction, the analyst spoke up with a series of Twitter posts. The way he sees it, Apple is unlikely to adjust iPhone orders this far out. The company tends to let the phones out first, in his estimation, only then gauging the “actual market demand/feedback.” In a separate Twitter post, the analyst wrote:

If a supply chain issue causes a significant change in the shipment plan of the new iPhones before mass production, Apple usually postpones the orders instead of cutting them.

All of that said, he sticking with the same numbers he posted last week: components enough for 100-million iPhones with expectations that the people who put them together will put together 90-million iPhone 14s by the end of this year.

Back to the Future

Getting over the hump that is the near term, while Chatterjee doesn’t seem excited about the overall economy through the next several quarters, he’s not worried about Apple. While he seems to hint at a hardware slowdown through Apple’s fiscal year 2024 thanks to “a slower macro,” Apple shares will be fine thanks to Apple’s ability to raise prices when necessary and its ability to buy back shares.

Mr. Chatterjee has an “Overweight” rating on Apple shares. His price target on the shares is $200.