As it is 2021, those risks naturally involve supply chain headwinds. Disruptions are a possibility due to a resurgence of COVID-19 cases in Vietnam – a major iPhone production hub – while power usage restrictions in China are playing their part too.
Nevertheless, while Chatterjee warns of “risks that are worth monitoring,” the analyst believes the “magnitude of those constraints are moderating at this time, and Apple is well positioned for a strong sales quarter in C4Q/F1Q (strong selling season in the last 45 days of the year).”
The latest iPhone’s production already suffered a “slightly delayed start” due to camera module issues. Specifically, there were supply bottlenecks for components needed for the sensor-shift optical image stabilization. As the feature has been included in all four models, the production ramp required was “steeper than anticipated.”
Then Covid-19 reared its ugly head again, as rising cases and consequent September lockdown measures impacted Sharp’s production facility in Ho Chi Minh City, Vietnam – where camera modules are manufactured.
With the easing of lockdown restrictions on October 1, and the “flexibility to also leverage LG Innotek’s camera facility in Vietnam, or a secondary facility in South Korea,” Chatterjee expects the production will “ramp steadily from hereon.”
However, there could be consequences to the disruption in what is usually a strong quarter. The 5-star analyst estimates potential headwinds could impact production to the tune of 5-10 million units out of a total of 143 million the analyst had modeled for 2H21 (of which 85 million are for the iPhone 13). This could “drive muted revenue seasonality for C4Q/F1Q22.” As such, JPM’s call for a quarter-over-quarter uptick of 55% is below the 60%-80% expected in “typical years.”
Even so, the headwinds don’t affect Chatterjee’s Overweight (i.e. Buy) rating or $180 price target on Apple shares. Investors are looking at upside of 27% from current levels. (See Apple stock analysis)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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Source: TipRanks Blog
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