Apple faces on February 2 the presentation of the most sensitive results in recent years. The effects of the supply crisis of the iPhone, its flagship, have crossed the company’s internal forum for the first time until reaching the end user, who this past Christmas has seen, for the first time, the offer of the new phone model has been incomplete and delivery delays have been extended up to now.
The technology shares have come to lose almost a third of their valuation from the highs in August until the end of 2022. That 30% drop has meant a decline of nearly 1 trillion dollars in stock market valuation, up to 1.9 trillion, but so far in 2023 it is recovering. Apple accumulates a revaluation of 10% this month after the rise of 2%, up to 137.9 dollars, which it captured last Friday.
The worst of its crisis seems like a thing of the past in the eyes of experts who, for the most part, consider that the dammed demand and consumer loyalty with their iPhone has not been eroded by the supply crisis. However, it won’t come for free. JPMorgan, one of the most influential Wall Street houses, has lowered its target price for Apple shares from $190 to $180 per share, but has maintained its “overweight” rating, that is, to buy and give more weight to the technology within the portfolio. The analyst consensus compiled by Bloomberg has a $170 price target, with a majority of buy recommendations.
According to Samik Chatterjee, an analyst at JPMorgan, the iPhone maker likely had a difficult first quarter (October to early January) due to earlier supply chain problems at its factories in China and weakening demand. In addition, the analysis anticipates that sales and results are likely to slightly miss consensus estimates. “We view the upcoming earnings release as a difficult situation for Apple due to the supply issues faced during the December quarter, which are now having demand issues for March and beyond,” Chatterjee said in a report on Thursday.
However, there is good news. JP Morgan is monitoring shipping estimates for iPhone 14 models around the world to gauge the disparity between demand and supply. According to the report, this divergence has effectively disappeared. However, the Covid outbreak in China has affected the production capacity of the iPhone 14 Pro and before the Christmas holidays, Apple found itself with an estimated shortage of between 15 and 20 million terminals, a figure that was multiplied by the price. The average sale of each of them, close to 1,000 dollars, yields a colossal number of up to 20,000 million impact on income, as Ming-Chi Kuo, from the TF Securities broker, warned at the beginning of December.
Now, the holidays are over and China has swapped the ‘Covid zero’ policy for a reopening that has allowed factories to return to normal capacity. Delivery dates for the two iPhone 14 Pro models around the world are less than a week away, a clear sign that supply has caught up with demand for the first time since its late-2022 launch, according to JPMorgan.
Apple logistics notes that all four iPhone 14 models have short standby times, around 4 days on average. In the US, for example, shipping takes approximately 5 days. In China and Europe, wait times are even shorter, around 3 days, and most models are available for store pickup.
In Spain, the iPhone 14 Pro Max, the ‘top of the range’ model and the one most affected by the supply crisis, is immediately available to pick up at the 11 Spanish Apple stores in Madrid, Barcelona, Málaga, Valencia, Valladolid, Zaragoza and Murcia, it is sent in 2 hours within the city itself and takes 48 hours for the rest of the territory, according to the official website. Industry sources ensure that third-party distributors such as Mediamarkt, Fnac or El Corte Inglés have the usual availability of models.
Despite the apparent good news for Apple, the company has not fixed the underlying vulnerability that led to the crisis last quarter, as it is still heavily dependent on the ‘iPhone City’ Zhengzhou facility, the only place in the world that makes the Pro and high-end version of the phone. However, the American giant has already encouraged its suppliers to diversify their activity to other countries such as India, Vietnam or Indonesia. Right now, ‘Indian’ iPhones account for just 5% of the total but the company’s goal is to raise that percentage to 25% by 2025, according to analysts. The plan also involves increasing the manufacture of products within the US, as demonstrated by the alliance with the chip producer TSMC in Arizona.