Needham Lowers Apple Revenue Estimate 13% on Virus Concerns; Expects SE2 Delay

Needham lowered its March-quarter revenue estimates for Apple by 13% Tuesday based on coronavirus-related supply chain bottlenecks and lower demand from China. Greater China generated about 15% of Apple’s December quarter revenue and typically is 15-20% of the company’s sales. Apple’s Feb. 17 revenue-forecast downgrade (see 2002180004), plus new coronavirus "hot spots" in Italy, Iran and South Korea, "suggest that lowering our AAPL estimates is the more prudent choice,” said analyst Laura Martin. She now assumes normal supply and demand will resume by June 1, not March as she previously assumed. The longer coronavirus disruptions continue past the first of June, “the greater the threat to AAPL's Sept new product launches (including its 5G phone) and Christmas selling season revenue, which represented about 32% of annual revs in each of the past 3 years,” she wrote investors. Needham’s estimates assume coronavirus disruptions -- including supply chain and demand weakness -- don’t affect the September or December quarters: “This assumption may prove too optimistic,” said Martin. Due to low inventories and supply chain disruption, Needham lowered March and June estimates for unit sales of AirPods and iPhone 11s; it also expects a delay in the launch of the rumored, smaller iPhone, the SE 2, “from its originally scheduled March Q launch.” Apple hosts an event on March 31 but didn't comment now. Monday, HP said the virus is affecting it, too (see report, this issue.)