Apple Analyst Projects 'Multi-Quarter Impact' On iPhone Shipments From COVID-19 Pandemic

Apple Inc. AAPL announced in mid-February that it is unlikely to meet its previously issued March quarter guidance, citing both supply and demand issues in response to the COVID-19 pandemic. Now an analyst Argus thinks the impact is likely to play out in more than one quarter.

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The Apple Analyst

Jim Kelleher reiterated a Buy rating on the shares of Apple with a $350 price target.

The Apple Thesis

Despite China coming back online, Apple is forced to close stores in the U.S. and other locations, Kelleher said in a Wednesday note. (See his track record here.)

The company's manufacturing partner Foxconn recently said it expects a lower level of iPhone shipments relative to its previous projections due to production and demand disruptions in multiple regions, the analyst said. 

Apple likely delaying the launch of its 5G iPhones from September to closer to Christmas or even into calendar year 2021, he said. 

"Apple may see a multi-quarter impact on iPhones shipments, as the COVID-19 pandemic continue to rage worldwide."

Apple has multiple strengths to help carry it through this turbulent period, Kelleher said. The analyst pointed to the successful diversification of iPhones across multiple price points that has served to broaden the market opportunity, booming demand for wearables such as AirPods and faster-than-planned growth of Apple Play during the shelter-at-home phase. 

Although Kelleher said Apple has the financial might to sustain both share buybacks and dividend growth during the pandemic, he said he expects the company to deemphasize buybacks.

Even with the removal of the March quarter guidance, Argus forecast moderate EPS growth in fiscal years 2020 and 2021.

"With EPS growth positive again, AAPL is attractive compared to its historical valuations and to peer average multiples. Apple's cash flow outlook is intact, and the stock is particularly attractive on DFCF valuation," the analyst said.

AAPL Price Action

At last check, Apple shares were slipping 2.87% to $246.99.

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Photo courtesy of Apple.