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Wells Fargo analyst Aaron Rakers is keeping the faith on Apple Inc. after the smartphone giant announced it was closing all of its retail locations outside China until March 27 to help prevent further spread of COVID-19, the disease brought on by the novel coronavirus.
Though Rakers already cut his March-quarter sales forecast to $53 billion from $59.8 billion last week, he argued that Apple’s AAPL, -8.45% latest announcement of shuttered stores, as well as some store closures from wireless carriers AT&T Inc. and Verizon Communications Inc., will likely “leave investors to consider further downside.” He estimates that investors could begin to contemplate March-quarter sales “into the mid-$40 billion range, or what would represent 30% downside from the midpoint of Apple’s initial $63 billion to $67 billion F2Q20 guide” that the company yanked about a month ago.
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Still, Wall Street may end up giving Apple a pass on its March report, in Rakers’ view. “We also believe investors will consider Apple’s F2Q20 results, and possibly even the F3Q20 (Jun ’20) guide, as throw-away periods from an investment thesis / valuation standpoint” he wrote. Rakers turned bullish on Apple’s stock last week, and he continues to believe that the company will be able to benefit from long-term tailwinds including 5 connectivity, growth in wearables, and services momentum.
The stock is off 7.6% in Monday trading and it’s lost 21% over the past month, as the Dow Jones Industrial Average DJIA, -8.48% has fallen 27%.
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Wedbush analyst Daniel Ives took a similar view to Rakers. “Fundamentally speaking, clearly closing Apple stores will have a further negative impact on the March quarter and potentially the June quarter depending on how long they stay closed, but at this point we believe investors are starting to look past these anomalous three to six months towards a more normalized FY21 valuation framework when it comes to the stock,” he wrote in a note to clients over the weekend.
