Just Apple confirmed that it was temporarily reducing the production of the iPhone 14 Pro and iPhone 14 Pro Max, its stock by 2%. However, Wedbush analysts say that investors should not be concerned about Apple’s performance in the upcoming quarter as the tech giant will only sustain minimal damage.
Apple stock price falls as iPhone production facility in China deals with COVID-19 outbreak
Apple’s main iPhone assembler Foxconn has been dealing with a COVID-19 outbreak at its Zhengzhou plant in central China. Foxconn even started offering quadruple daily bonuses in an effort to retain workers at the plant since many employees were not willing to work under the Chinese government’s closed-loop production protocols.
Following the instability at Foxconn’s facility in China due to the COVID outbreak, Apple recently confirmed that it would be reducing the production of the iPhone 14 Pro and iPhone 14 Pro Max models. This news led Apple’s stock price to fall by 2% to $135.56 with more than 1 million shares exchanged.
While investors are scrambling to sell their shares, Wedbush analysts Daniel Ives and John Katsingris strongly advise against this. “After battling the macro headwinds and delivering a strong September quarter/guidance in a stark contrast to the rest of Big Tech, this latest zero-Covid situation is an absolute gut punch for Apple in its most important holiday quarter,” Wedbush analyst Dan Ives wrote in a note early Monday.
Ives went on to say that demand for the iPhone 14 Pro models remains strong and Wedbush estimates that the situation in China will negatively impact roughly 3% of iPhone sales this quarter. “If Zhengzhou remains at lower capacity the next few weeks, this would cause clear iPhone Pro shortages into the all-important Christmas time period especially in the US,” said Ives.
In conclusion, Wedbush believes that investors should not be worried about Apple’s earnings since the issue is not demand-and-supply related. Instead, the problem will resolve itself once the COVID production policies in China ease and iPhone production is back on track.
However, if iPhone production in China continues to be unstable, Apple is prepared. The tech giant is in talks with other suppliers, Pegatron and Luxshare ICT, to ask them to switch production lines of the iPhone 14 and iPhone 14 Plus to the iPhone 14 Pro and Pro Max.