We're sticking with Apple despite questions about holiday-quarter iPhone production delays

Published Wed, Nov 9 20223:56 PM EST

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

A closely watched Apple analyst on Wednesday highlighted some potential noise surrounding the iPhone maker's upcoming December quarter, underscoring why we routinely warn against trading in and out the stock. Shares of Apple (AAPL) have not been spared in this year's tech rout. However, while down roughly 24% in 2022, the company still has a market value of about $2.15 trillion. In a note to clients, Bernstein analyst Toni Sacconaghi discussed two main reasons why he believes Wall Street's consensus estimates for Apple are too high — and, as a result, why he thinks they could be revised lower in the future. Reason No. 1 The first is Apple's announcement over the weekend, in which the tech giant said it was lowering production of the iPhone 14 Pro and iPhone 14 Pro Max due to Covid restrictions at a key assembly plant in China. Even though it continues to see "strong demand" for the high-end phones, Apple now expects fewer shipments than it "previously anticipated and customers will experience longer wait times to receive their new products," according to Sunday's press release . Sacconaghi expressed some issues with Apple's press release, arguing it was "vague in not defining the period in which Apple expects lower shipments — i.e., just the December quarter, or the full year." "Moreover, the fact that the release occurred so early in the quarter (when ostensibly Apple could make up for lost production days) begs the question of whether demand for iPhone or other products inflected negatively, or whether Apple felt that consensus estimates for FY Q1 were simply too high," wrote the analyst, who has a neutral rating on Apple shares and a $170-per-share price target. Reason No. 2 The second concern Sacconaghi flagged goes beyond trying to decipher a three-paragraph press release. Instead, the analyst dug into the impact that Apple's abnormal calendar for fiscal 2023 has on the Street's financial models. Apple's first quarter is 14 weeks long this year and ends Dec. 31, instead of its traditional 13 weeks. The analyst thinks this could lead revenue being assigned to the first quarter that, normally, would be recorded in Apple's second quarter. This may result in some revenue estimates for Q2 being too high. "Our analysis suggests that conse