Analyst remains bullish on Apple as ‘there’s a lot more headline risk’

An Apple Store on Nanjing Road Pedestrian Street in Shanghai, China, 16 December 2022.

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One analyst maintains a bullish outlook Apple although shares of the tech giant have fallen to their lowest levels since June 2021 amid ongoing concerns over iPhone shipments.

“Apple is the biggest US name out there, and we think there’s a lot more headline risk than anything else,” Angelo Zino, senior industry analyst at CFRA Research, told CNBC’s Squawk Box Asia on Wednesday.

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One headline risk is the risk that a company’s share price will fall due to negative publicity.

Apple shares fell to their lowest since June 2021 as iPhone production is threatened by a widespread Covid outbreak in China after the country abandoned its zero Covid policy.

The outbreak could potentially lead to labor shortages at component plants or assembly plants across the country.

Apple has been struggling with production bottlenecks for the last two months. In November, iPhone 14 production at its main iPhone 14 Pro and iPhone 14 Pro Max assembly plant in Zhengzhou, China was impacted by Covid-19 restrictions and labor protests.

Last week, a JPMorgan Chase analyst said the supply gap is likely to last through the end of the year, weighing on typical seasonal increases in volumes. Apple had a “major disruption” on 6/11 ahead of the holiday season.

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“While the rapid increase in delivery times for iPhone 14 Pro/Pro Max has slowed and actually slowed down in recent weeks, it still remains elevated compared to pre-COVID delivery times in Zhengzhou,” said Samik Chatterjee, in a note to investors.

“Ultimately, Apple will do whatever it takes to defend its business across geographies for as long as possible,” Zino said.

He added that the actual impact on sales in the US and Europe will be less than 1%.

Despite shortages, many analysts predicted that Apple customers will remain loyal to the brand’s products.

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“We think a lot of the consumers out there are creatures of habit and won’t necessarily shy away from what they’ve done in Apple’s ecosystem in the past,” Zino said.

In the interview, he also mentioned that Apple and Microsoft have held up despite headwinds in the technology sector.

“If you look at the names that have held up best, two of them are Apple and Microsoft, and that makes a lot of sense,” Zino said.

“Because, from multiple perspectives, they’re a lot more affordable than some of the other names out there and have the best free cash flow predictability.”

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