Loup Ventures has been tracking lead times of four key Apple products in 13 countries since mid-February 2020 and recently found supply has improved over the past two weeks. amid the global COVID-19 coronavirus pandemic.
iPhone (~52% of revenue) supply, as measured by the lead times of iPhone 11 64GB and iPhone 11 Pro 64GB, is now (March 17) an average of 2.0 days compared to a peak of 6.7 days on March 4. AirPods (~4% of revenue) supply, as measured by AirPods Pro and AirPods 2nd gen lead times, is now (March 17) an average of 7.4 days compared to 10.6 days on March 4.
Do lead times improve because of better supply or less demand? The simple answer is it’s impossible to know. Our guess is the majority of the lower lead times are related to the restart of production in China, and a minority of the improvement is from softening global demand.
In the face of upcoming downward revisions of the Street’s Apple estimates, we continue to believe Apple is a must-own name. Our long-term thesis is strengthened by a belief that Apple will come out of this period stronger, given some less-capitalized companies will exit with compromised balance sheets. Our long-term view is unchanged. Apple’s combination of hardware, software, and services yields a competitive advantage not fully reflected in Apple’s earnings multiple and ultimately share price.
MacDailyNews Take: As China restarts production, combined with worldwide Apple Retail Store closings (outside of Greater China), it makes perfect sense to see improved supplies of key products. As Munster writes, it’s impossible to know if increased production or softening demand is contributing more to the supply improvements, but it’s obviously a combination of the two. We also agree that Apple is a must-own stock that, with each price drop, gets ever more attractive long term.