Monday, March 14, 2022 09:03 AM
(Bloomberg) —
(Updates trading, adds comments from Morgan Stanley.)
Apple shares are down 1.6% on Monday after supplier Foxconn halted operations at its Shenzhen sites following a government-imposed lockdown. However, analysts see a limited impact from the issue.
- Read more: Foxconn Halts IPhone Production in Shenzhen After Lockdown (3)
- Morgan Stanley (overweight, PT $210)
- “While these lockdowns do present a near-term risk to Apple, we believe the immediate impact will be limited” as the main production sites for Apple’s key products are primarily outside of Shenzhen, and as “Foxconn should have inventory buffers on hand to minimize the near-term impact”
- The firm estimates that Apple’s exposure to Shenzhen is less than 20% of production
- BofA (buy, PT $215)
- Apple has “manageable but significant exposure to Shenzhen”
- Apple and Foxconn “have the ability to relocate production to other areas in the short term provided that there is not a significantly higher duration of lockdown,” but a longer shutdown “can cause ripple effects at other components that can create a shortfall in production”
- Evercore ISI (outperform, PT $210)
- “Even without reallocation, a 7-day shutdown of one of the several iPhone plants should not result in a material impact”
- This is “a manageable issue,” especially if it is limited to one week, although “the challenges could be more supply chain problems for the tech ecosystem and further pressure on supply/logistics overall”
- Piper Sandler (overweight, PT $200)
- “Production from the Shenzhen facility could be transferred to other sites, leaving limited impact”
- The firm views iPhone demand as “sticky,” which suggests that customers “will wait to make their purchase until any supply impact is resolved”
- With the day’s decline, Apple shares fell below their 200-day moving average; should the stock close under that level, it would mark the first time it has done so since June