The next three months are going to be crucial in determining Apple’s year ahead, Wedbush analyst Dan Ives writes in his latest note to clients, as seen by Cult of Mac.
In a message sent Sunday, Ives lays out his thoughts on best- and worst-case scenarios for Apple over the next few months amid fallout from the coronavirus pandemic. The results likely will have a major impact on Apple going forward.
Apple supply chain and coronavirus
In Ives’ best-case scenario, Apple’s Chinese supply chain — hit hard by the COVID-19 outbreak that started in the country — gets back toward full capacity by late April. Apple’s eagerly anticipated 5G iPhone launch would happen in the fall without delay. In this scenario, Ives also sees European and U.S. consumer demand returning to normal over the summer. Meanwhile, China demand returns to normal by September. He suggests that Apple could launch its lower-cost iPhone SE 2/iPhone 9 in May, rather than its original March plan.
A middle scenario, meanwhile, calls for supply chain capacity to get back to normal by late May. There would be a slight delay on the iPhone 12, pushing it back later into the holiday season. U.S. and European consumer demand would get back to normal in the fall. China wound “rebound … modestly” in the June and September quarters, albeit with “some clear demand destruction.” In this scenario, the low-cost iPhone would hit shelves in June, rather than the original March.
Finally, Ives lays out his predictions for a worst-case scenario for Apple. In this version, the supply chain doesn’t reach full capacity until June. The 5G iPhone 12 gets pushed out beyond the normal holiday season. U.S. and European consumer demand takes until the end of the year to pick up. Meanwhile, China suffers clear demand destruction, hurting Apple in one of its key markets. Apple’s low-cost iPhone wouldn’t hit shelves until as late as July.
Predicting the unpredictable
To some extent, all of these are guesswork, of course. Much of this involves predicting the fundamentally unpredictable spread of the coronavirus over the coming weeks and months. Even with the worst-case scenario, however, Ives remains bullish about Apple’s prospects. Ives remains extremely buoyed by the promise of a 5G iPhone super-cycle. Just as crucially, he thinks Apple’s “Teflon-like” Services division has the opportunity to hit approximately $60 billion in fiscal year 2021. For this reason, even a “more doomsday type scenario” makes Apple a good bet, Ives writes.
His 12-month price target for the stock is $335. At present, Apple trades at $247.74, down from an all-time high of $324.34.