Apple, Inc. AAPL announced on Sunday that the supply of its iPhone 14 Pro, Pro Max would be impacted by the COVID-19 curbs in Zhengzhou, China, where the assembly plant of its supply-chain partner Hon Hai Precision Manufacturing Company Limited HNHPF is located.
What Happened: The latest zero-COVID situation is an "absolute gut punch" for Apple in its most important holiday quarter, Wedbush analyst Daniel Ives said in a note. The demand remains firm into the holiday season but the supply disruptions will likely impact about 3% of iPhone sales in the quarter, depending on how production and supply chain issues evolve, the analyst said.
If Zhengzhou operates at lower capacity over the next few weeks, it would constrain iPhone 14 Pro supply in the all-important Christmas season, especially in the U.S., the analyst said.
“While not the news any bull wants to hear from Apple, it’s a supply issue and related to China's zero Covid policy which is a very frustrating situation for Apple (and its investors) yet again but not demand-driven,” Ives said.
While the Zhengzhou and Foxconn situation in China remains an “ongoing albatross” for Apple, Wedbush’s positive thesis on the demand story for Apple remains unchanged, he added.
Ives also said he would be a buyer on any knee-jerk weakness on Monday morning, as the Street digests the news.
The analyst maintained an Outperform rating and $200 price target for Apple shares.
Price Action: In premarket trading, Apple shares were sliding 1.64% to $136.11, according to Benzinga Pro data.
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