Apple’s first fiscal quarter could be affected by problems with iPhone sales during the holiday season, according to UBS analysts. Factory disruptions caused by the COVID lockdowns in the December quarter led to “significantly longer wait times” for the iPhone 14 Pro and Pro Max models and is the main cause of the problem.
The escalation occurred in November, with 34 days of wait time for some Pro models in the US and 36 days in China. His Zhengzhou factory, one of his largest China-based Foxconn factories, has since made news. Workers have resorted to violence to complain about wages and COVID.
However, UBS analysts believe the Pro model’s latency is steadily improving based on what Apple has said about the situation. iPhone Christmas sales may have been affected, but there is a silver lining that a stronger currency against the dollar may have helped Apple’s overall financial health.
UBS predicts that Apple will ship 79 million iPhones in the first quarter of 2023. This is slightly below consensus’s 80 million units, but much higher than the lowest estimate, his 74 million units. Despite UBS’s projected 3% decline, there is another positive outlook for year-on-year sales.
According to UBS, Apple will ship 232 million iPhones in 2023. That’s a little short of the consensus of his 238 million units, but that’s not too bad given the financial situation. Zhengzhou factory issues and long wait times for iPhone Pro models have had little impact on distribution diversity across Apple’s model portfolio. About 56% of iPhones sold in the US in the December quarter were Pro models.
UBS estimates that a shortfall of 5 million iPhones compared to projections would result in a loss of $1.7 billion in pre-tax earnings and a $0.10 reduction in earnings per share (EPS). Contribution margin of iPhone business is 40%. Expected revenue and EPS are set at $120.3 billion and $1.93, respectively, lower than the consensus forecast of $122.9 billion and $1.96.