China Lockdowns Could Evolve As A 'Demand Problem' For Apple, Says Analyst

A renowned Apple Inc. AAPL analyst on Wednesday suggested that the China COVID-19 lockdown situation could evolve more as a demand problem for the iPhone maker than as a production issue.

China's "zero-COVID" policy would have a more significant impact on the demand side than on the production side, TFI Securities analyst Ming-Chi Kuo said in a series of tweets.

"It's a potential system risk in [the second] half of 2022 for all brands and upstream suppliers," the analyst said.

Explaining his rationale, Kuo said demand-side risk occurs when consumption of essentials increases, leaving less to spend on consumer discretionary items such as consumer electronics.

Reacting to a Reuters report that said Hon Hai Precision Industry Co., Ltd. HNHPF isn't shutting down production at its facility in the COVID-19-hit Zhengzhou city, Kuo said if curbs in the city aren't lifted by June, iPhone 14 production may be impacted by logistics and workforce allocation.

Related Link: Apple Analyst Sees Limited Upside/Downside In Stock Until This Happens

Why It's Important: Apple has a rich launch pipeline scheduled for the second half of the year. The period is also traditionally stronger for the company, given it encompasses the back-to-school and holiday quarters.

The specter of lower output and softer demand, therefore, does not bode well for the company.

Price Action: Apple closed Wednesday's session 4.10% higher at $166.02, according to Benzinga Pro data.

Related Link: Apple Analyst Warns Of 'Considerable Risk' For Tech Sector In Coming Months

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorAsiaMarketsAnalyst RatingsTechMediaChinaCovid-19iPhone
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!