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Canadian iPhone sales won't be affected despite coronavirus hit on Apple supply chain: analysts

Shruti Shekar
Telecom & Tech Reporter
REUTERS

Apple shares fell two per cent on February 19 after the iPhone maker said the COVID-19 crisis will hurt sales in the current quarter, but equity analysts do not think this will affect sales in Canada. 

The California-based company said it wasn’t going to meet its Q2 financial guidance, which was projected between US $63 and $67 billion. 

“While our iPhone manufacturing partner sites are located outside the Hubei province [in China] — and while all of these facilities have reopened — they are ramping up more slowly than we had anticipated,” the company said in a statement. 

Apple did not update its revenue guidance with specific targets. Gene Munster, an analyst at Loup Ventures, said it was because the company “doesn’t know how this is going to play out.”

“We could still be working through this in six months,” Munster said in an interview. 

Munster expects iPhone inventory in Canada and the U.S to decrease, and said that the extent to how much it drops will be clear in the next two weeks.

But despite low inventory, he said that the yearly growth of iPhone demand in Canada is “modest” at five per cent, and that Canadians tend to keep their phones for about three years. 

“This smartphone market is kind of a flattish market to people that are holding their phones longer... but [because of coronavirus] it’s no longer up,” he said, explaining that if Apple was hoping to grow its smartphone market share, COVID-19 will impede that goal. 

As of January 2020, Apple is Canada’s most popular handset maker with a 51.3 per cent market share, while Samsung is second at 28.7 per cent, according to StatCounter. 

A Piper Sandler analyst note said iPhone supply constraints in the current quarter “could result in pent-up demand for future quarters.” It said that the existing demand for the phone outside of China “appears to be strong.”

Edward Jones’ analyst Logan Purk said in an interview that Apple’s comments on sales weakness was surprising considering the revenue projection Apple maintained. But he said if there’s a “hiccup in manufacturing” it won’t impact Canadian customers now as much as it would have customers in the past. 

“If they couldn’t get that phone now they would say ‘well I need to upgrade, I’ll either get an older model, or I’ll get a Samsung instead of an Apple product,’” he said. 

On February 18, Apple’s stock was trading down midday at the time of the announcement to $318.74, but on February 19 its stock was 1.63 per cent higher, trading at $324.22. 

Munster said that this wasn’t surprising because investors are viewing the COVID-19 impact “as a near term [issue] and effectively as a non event.” 

With files from Reuters