The heavyweight broker repeated a ‘hold’ on the tech titan and cut the target to US$295 from US$305 previously (current price: US$292.92).
“Worldwide iPhone supply will be temporarily constrained,” Apple said in a statement on February 18 this year, having previously forecast revenues of US$67 billion in the quarter to end-March.
Although most of Apple’s manufacturing partners are based outside the main outbreak area of the virus in Hubei province, China, they have nonetheless been affected and were ramping up to full production of the phones more slowly than expected, it said.
Deutsche noted it did not publish a new model for Apple two weeks ago as the coronavirus situation was still “in flux” in China and Apple itself had said it was uncertain on a new revenue range, given it was only halfway through the quarter.
The broker said it had now reduced its March-quarter revenue estimates to US$60.4 billion, with iPhone units down 44% quarter-on-quarter to a production figure of 40 million new smartphones.
In addition, on March 3, Foxconn, Apple’s main assembler of products such as the iPhone and iPad, revealed that it expects to resume normal production by the end of this month.
“While we still see considerable uncertainty for Apple through March, and we stress that we are providing a thought framework rather than exuding high confidence in our estimates, we feel incrementally more comfortable with taking a stab at how March could shape up, given incremental production-related disclosures by Foxconn in the past week,” said Deutsche.
These days, Apple has more exposure to services revenue, which is both stickier and higher margin, and less to just iPhones, the broker highlighted.
“… AirPods have emerged as a strong contender to be the “right hand man” to iPhone by revenue size,” it added.
“In our view, these aren’t reasons enough to re-rate the stock this much higher vs. the market, thus we remain on the sidelines.”