Apple (AAPL) could have a few other problems on its hands in 2023 besides an uncertain manufacturing situation in China, according to one Apple bull on the Street.
"I think there are two main issues lying ahead of Apple for 2023," Oppenheimer analyst Martin Yang said on Yahoo Finance Live (video above). "Number one is we've seen two years of very strong upgrade and replacement cycle for iPhone, ... and that replacement cycle strength may weaken into '23 by two factors. One is the majority of the installed base is most likely upgraded, and then continuing macroeconomic pressure will cause certain groups of consumers to delay their upgrade. Secondly, there are ongoing pressures on Apple's services software revenues."
Apple's stock is already under pressure amid the COVID situation out of a key manufacturing hub in China.
China's COVID-19 cases are surging toward record highs just as the country was moving away from its zero-COVID policy. Violent protests erupted at the flagship plant of iPhone maker Foxconn last week and have intensified across the country in recent days.
"Apple is struggling to overcome a combination of shutdowns and worker protests at a key production facility in Zhengzhou, China, that resulted in Apple negatively pre announcing on Nov. 6," EvercoreISI analyst Amit Daryanani wrote in a note on Tuesday. "Since then the situation in Zhengzhou appears to have somewhat improved but not back to normal. We think the site has been operating at ~60-70% utilization for nearly a month. To reflect the continued headwinds we are adjusting our [quarterly] estimates lower as iPhone demand could get affected by 5-8 million units (mostly at high-end) and negatively impact revenues by ~$5-8 billion in [the current quarter, which ends after December]."
Daryanani isn't alone in his near-term concern over Apple's bottom line because of China.
"It has been a gut punch at the worst time possible for Apple," Wedbush Managing Director Dan Ives said on Yahoo Finance Live. "We're talking shortages in a lot of Apple stores of upwards of 30% of iPhones in terms of the iPhone 14."
Ives estimated that Apple now has "significant" iPhone shortages that could wipe off 5% to 10% of units in the current quarter.