BofA analyst Wamsi Mohan reiterated a Buy rating and a $215.00 per share price target on Apple (NASDAQ:AAPL) shares following reports that the Cupertino-based giant is planning to cut iPhone SE production.
Nikkei recently reported that Apple is looking to produce 20% fewer iPhone SE next quarter as it is experiencing weaker demand amid war in Ukraine. Moreover, the report noted some order cuts for iPhone 13 and AirPods.
Mohan reiterated that the demand for iPhones remains strong following his analysis of iPhone trade-in prices.
Apple is offering trade-in values that are at a discount compared to 3rd parties in the U.S. and the UK. Further, Apple recently reduced the trade-in prices for the majority of its models in the U.S., UK and China. In our opinion, lower Apple trade-in prices vs 3rd parties and the reduction in overall iPhone trade-in prices signifies strong demand. This compares to the year 2019 when Apple was offering high trade-in prices vs 3rd parties to drive upgrades, Mohan said in a client note.
Moreover, BofA's recent survey showed that over 25% of respondents globally still have old iPhones (iPhone 8 or earlier).
We see this as an opportunity for driving a replacement cycle. iPhone 6 and iPhone 6 Plus ownership is relatively higher in China compared to the U.S. and U.K. Apple could be targeting to upgrade these users to a newer iPhone which could be a reason Apple still accepts the iPhone 6 and 6 Plus models for trade-in in China but not in the U.S. and U.K.
The analyst is also not worried about the new round of lockdowns in Shanghai as both Apple and Foxconn are able to relocate production to other non-impacted areas.
We do not expect a material impact from these shutdowns, Mohan concluded.
By Senad Karaahmetovic