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JPMorgan: lack of capacity makes it difficult for Apple to meet holiday demand for iPhone 14

J.P. Morgan said the current situation at Apple’s China iPhone factory will certainly affect shipments, but the full impact will not be known until the factory resumes normal output. Foxconn’s assembly plant in Zhengzhou, China, is dealing with the effects of the outbreak. The factory is Apple’s largest iPhone producer and the impact on its output has led analysts to offer their take on the situation.

A note to investors from JPMorgan Chase on Monday acknowledged that it’s difficult to determine how much the factory has been impacted “given the limited public data points around current capacity.” However, analysts believe the sudden and rapid extension of delivery times for the iPhone 14 Pro and iPhone 14 Pro Max “suggests that a supply shortage has occurred and could continue through the end of 2022.”

While the greatest impact on iPhone supply will be felt during the holiday season – the first quarter of Apple’s fiscal year 2023 – “the full extent of the headwinds to production will only become clear when production can return to normal levels and factories return to full capacity.”

Apple issued a rare press release on the matter last week, which included details on supply and confirmation of reliance on the factories, telling JPMorgan that the headwinds to his revenue and earnings estimates for the quarter “could be significant.

In response, J.P. Morgan is making “the first cut at quantifying the potential impact, but still has optimistic expectations around managing the flexibility to produce other iPhone models.”

J.P. Morgan’s estimates for iPhone 14 Pro and Pro Max shipments fell by 5 million units in the December quarter, with other iPhones falling by 3 million units in the same period. This equates to an overall shipment forecast of 74 million for the period, down from 82 million.

Meanwhile, iPhone shipments in March are forecast to grow from 56 million to 61 million, with some unmet demand from December expected to flow into the March quarter where it is located.

For the full year 2023, JPMorgan now estimates that total iPhone sales will reach 237 million units, compared to 239 million previously. This would represent a 4% year-over-year decline.

In terms of revenue and earnings forecasts, JPMorgan sees revenue of $121 billion and earnings per share of $1.91 for the December quarter, down from $128 billion and $2.14, respectively. This would be a 3% year-over-year decline in revenue and a 9% year-over-year decline in earnings.

JPMorgan maintains a one-year price target of $200 and ranks Apple as “overweight.

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