BofA Securities recently held a conversation with Elliot Lan, a former Foxconn executive with extensive knowledge of Apple Inc.'s (NASDAQ: AAPL) supply chain. The chat prompted the research firm to maintain a bullish stance on Apple's stock, but lower its price target amid expectations for some delays in product launches due to the ongoing coronavirus crisis.
The Apple Analyst
Wamsi Mohan maintains a Buy rating on Apple with a price target lowered from $350 to $320.
The Apple Thesis
Mohan said Lan's commentary pointed to labor shortages and lower productivity in Chinese manufacturing facilities which resulted in lower iPhone production throughout February and into March. Apple is ramping production by up to 20% higher than usual to catch up by April.
Nevertheless, Apple faces the "possibility" of delaying its iPhone SE2 launch and the research form is now assuming not a single unit will be sold during the March quarter. Apple's launch of a 5G iPhone could be delayed by one month and would vary on Apple's success in ramping production in April and May. For now, a 5G phone could be launched in September.
Meanwhile, the coronavirus has spread "well beyond" China which could result in a lower than previously expected global demand outlook for Apple's products, the analyst wrote in the note.
BofA Securities made the following estimate changes:
- Fiscal 2020 revenue from $279.3 billion to $261.6 billion.
- Fiscal 2020 EPS from $13.29 to $12.57.
- Fiscal 2021 revenue from $325.4 billion to $312.1 billion.
- Fiscal 2021 EPS from $16.09 to $15.36.
AAPL Price Action
Shares of Apple were trading lower by more than 3.4% to $276.37 at time of publication.