Has Rising Inflation Hurt iPhone Sales?

Apple, Inc.'s AAPL iPhone demand held up fairly well in April despite several uncertainties, according to a KeyBanc Capital Markets analyst. 

The Apple Analyst: John Vinh maintained an Overweight rating and $191 price target on Apple shares.

The Apple Takeaways: Customer demand for the iPhone 13 remains healthy, thanks to better supply, tax refunds and robust foot traffic, Vinh said, citing the firm's Key First Look Data.

Citing checks, the analyst said iPhone sales fell 17% month-over-month but increased 13% year-over-year in April. The month's sequential drop is largely in line with the historical trend of an 18% drop, the analyst said. The strong year-over-year increase, he said, was due to increasing store traffic compared to limited store opening in 2021, as well as a favorable mix.

Inventories remain extremely lean, reflecting the supply disruptions associated with China COVID lockdowns, Vinh said. Regarding the product mix, the analyst noted a modestly improving supply of iPhone Pro/Max models and modestly declining supply of the iPhone 13 and Mini.

Related Link: Apple's Future Foldable iPhone Could Carry A Kindle-Like Add-On Screen

Rising inflation has had only minimal impact on iPhone demand, the analyst said. Higher-end iPhone SKUs are continuing to outsell lower-end models such as the Mini and SE3, he said.

Over the last three years, Apple Hardware sales have fallen about 6% quarter-over-quarter in the June quarter, Vinh said. The current consensus estimate calls for a 19% drop in revenues, the analyst said.

KeyBanc said its survey does not point to a slowdown in U.S. demand. The risk, however, is likely to be China and the supply chain, Vinh said. KeyBanc sees both issues as transitory.

"Apple's guidance includes a $4B-$8B impact from Supply Chain, and an unknown China impact that we feel is conservatively embedded in consensus expectations," the analyst said. 

AAPL Price Action: In premarket trading on Tuesday, Apple shares are climbing 1.92% to $148.33, according to Benzinga Pro data.

Photo courtesy of Apple.