September is always a big month for Apple (NASDAQ:AAPL), and September 2020 was expected to be even bigger than usual.
Fall is when Apple launches its new flagship iPhones. Even during this era of slowing smartphone sales, the iPhone is a critical driver of Apple stock growth. This September was to be the launch of the iPhone 12, Apple’s first model to incorporate 5G connectivity. And that was expected to kick off the big upgrade cycle that has eluded the company over the past several years.
With the novel coronavirus disruption, however, analysts for Wedbush Securities have concerns. That led to a big cut in their target price for Apple stock.
Big Plans for the 5G iPhone 12 and Apple Stock
Apple’s iPhone business has been sliding for the past several years. In 2018, the company announced it would stop reporting unit sales in an attempt to take the focus off those slipping numbers. Recent predictions of upgrade “super cycles” have failed to materialize. However, it was thought Apple had a real shot this fall.
After a multi-year legal battle with Qualcomm (NASDAQ:QCOM), Apple finally settled with the smartphone chipmaker last April. That opened the door for 5G modems in iPhones. They wouldn’t arrive in time for the iPhone 11, but with 5G networks in their infancy, Apple was fine with sitting last year out.
However 5G is a much bigger deal this year. Last October, it was reported that the company was expecting to move 200 million iPhones in 2020 on the strength of a 5G iPhone 12, reclaiming its global No. 2 spot from China’s Huawei.
With the coronavirus pandemic, that scenario may be jeopardized. And that has significant implications for Apple stock.
Wedbush Cuts Apple Price Target Based on iPhone 12 Launch Concerns
On March 29, Wedbush Securities analysts Daniel Ives and Strecker Backe cut their 12-month price target on Apple stock from $335 to $247.74, citing concerns that the 5G iPhone 12 launch will be delayed.
They believe that AAPL was positioned to sell a lot of new iPhones this fall.
…this is not any ordinary year for Cook and Cupertino as the company is entering in our opinion one of its most important iPhone upgrade product cycles ever as the drumroll for the 5G super cycle was slated to kick off in the September timeframe…
However, the coronavirus pandemic is complicating that picture. The Wedbush analysts are concerned about the potential for Apple’s supply chain to be delayed in ramping production up in time for the traditional fall launch. They project this could cause the launch to be pushed to the holiday season, or even into 2021. In their worst case scenario, Apple suppliers don’t hit full speed until June. This results in the 5G iPhone 12 launch being pushed as late as mid-2021.
This not only delays the expected upgrade super-cycle, Apple could lose customers altogether in China. That country is expected to see a return to normalcy sooner than Western countries which are just beginning their coronavirus lockdowns. Chinese consumers may tire of waiting for the new iPhone and buy competing flagship smartphones that do offer 5G.
However, Wedbush does see security in the company’s Services division, which it describes as being “Teflon-like and poised to hit roughly $60 billion in FY21…”
Is Wedbush Right About Apple Stock?
Will Wedbush turn out to be correct about the coronavirus impact on the iPhone 12 launch and sales? Obviously, we won’t know the answer to that question until closer to September. At this point, the firm’s downgraded $247.74 price target is significantly lower than most of its peers. Among investment analysts surveyed by The Wall Street Journal, the median 12-month price target is $319.44 for AAPL.
The one thing Wedbush and most analysts can agree on at this point, is that Apple stock retains a “buy” rating, regardless of what happens in September.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.