Apple Christmas iPhone Sales Will Take Supply Chain Hit, Says JPMorgan; Cuts Price Target

“We continue to see the supply shortfall continuing through year-end and impacting the typical seasonal uptick in iPhone volumes,” said JPMorgan analyst Samik Chatterjee.

Apple  (AAPL) – Get Free Report shares were active in pre-market trading Tuesday following a price target cut from analysts at JPMorgan and a muted holiday sales outlook.

JPMorgan analyst Samik Chatterjee clipped $10 from his Apple price target, taking it to $190 per share, while maintaining an ‘overweight’ rating on the stock heading into the final days of the trading year.

Chatterjee cautioned, however, that supply chain challenges, linked to the ongoing Covid disruption in China, would take some 4 million from the tech giant’s December iPhone sales, which he now pegs at around 70 million.

Last month, Bloomberg reported that Apple could see a 6 million shortfall in iPhone production from disruptions at its key China manufacturing plant, affecting mostly its high-end iPhone 14 Pro and Pro Max devices.

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“We continue to see the supply shortfall continuing through year-end and impacting the typical seasonal uptick in iPhone volumes seen in Dec-Q. Thus, we are moderating our iPhone 14 Pro / Pro Max shipment forecast again in the Dec-Q,” Chatterjee said. 

“We again expect the impact to estimates for FY23 overall to be more modest as we anticipate part of the shipment shortfall in the Dec-Q to be made up in the Mar-Q with supply constraints easing up in the lower production months and only a modest impact to demand given the historical precedent for Apple consumers to wait through a delay,” he added.

Apple shares were marked 0.17% higher in pre-market trading to indicate an opening bell price of $85.93 each. 

Apple’s key China manufacturing hub, based in the north east city of Zhengzhou, saw violent protests in November as staff demonstrated against pay and working conditions in the 200,000-person plant run by Taiwan’s Foxconn.

Hundreds of workers were filmed in protest outside the plant, known as ‘iPhone City’, with some smashing windows and tearing down barricades, amid accusations of delayed bonus payments and dangerous working conditions linked to an earlier Covid outbreak.

The protests came shortly after Apple cautioned that Covid restrictions at the 200,000-person plant would curtail shipments of its higher-end iPhones heading into the holiday season in most of its global markets.

Apple CEO Tim Cook said in October that iPhone demand has remained healthy, but noted that supply constraints for both the 14 Pro and the 14 Pro Max continued to persist heading into the key holiday season, even prior to the added restrictions at Zhengzhou.

iPhone revenues, in fact, were an important component of Apple’s better-than-expected September quarter earnings, with sales rising 9.6% from last year to $42.62 billion.

Overall revenues, however, rose 2% from last year to an all-time high of $90.15 billion, helping Apple to a Street-beating fourth quarter earnings tally of $1.29 per share.

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