Apple’s Services unit might benefit from the coronavirus
Krish Sankar, an analyst at Cowen, sent a note to clients on Friday noting that if the quarantine is extended well past February 10th (this coming Monday), the risk to the supply chain is increased. The note said, “Apple’s supply chain typically has about a week or two of buffer inventory during the Lunar New Year holiday and as such any major extensions of the quarantine beyond Feb. 10 increase the risks of impacting the supply chain. This could effectively limit or push out near-term demand even in other geographies.”
Wedbush Securities’ Brad Gastwith told clients that “There clearly will be manufacturing disruption, but again it is too early to make any predictions until we get an idea of what factories are like post-Feb. 10. Executives we speak with are uncertain as to what portion of their workforce will return on Feb. 10 due to either travel restrictions, or fear of contagion.” The analyst says that in the near term, the biggest question will be whether demand in China for Apple’s devices will disappear or just pushed forward to a future date. Cowan’s Sankar says that with travel limited inside China and the Apple Stores closed, demand inside the country will be hobbled. But he sees only “partial demand destruction” with consumers pushing back purchases of gadgets back until later this year.
One part of Apple’s business that could benefit from the coronavirus is its Services division which includes the App Store. Looking to while away the time while their movements are limited, Chinese iPhone users could turn to the App Store for entertainment including video games and other apps.