Why Some Wall Street Banks Believe Coronavirus Is Actually Good News for Apple

At least two investment banks believe that an iPhone sales rebound is already on its way.

A masked staff member, right, waits on two customers checking out an iPad in an Apple Store in Nanjing in east China’s Jiangsu province Saturday, Feb. 1, 2020. Feature China/Barcroft Media via Getty Images

On Monday, as the death toll from the COVID-19 outbreak climbed above 1,700, Apple (AAPL) issued a notice to investors, warning that it would probably not meet its previously set financial target for the first quarter of 2020 due to the impact of the coronavirus outbreak on its China supply and consumer demand.

Before then, Apple had already closed all of its China stores for over a week in early February when the entire country was practically put under a self-quarantine.

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Apple shares fell nearly 2% Tuesday morning on the news, before quickly regaining ground. Turns out, not every one was concerned about Apple’s voluntary warning. In fact, at least three Wall Street optimists believe that, instead of hurting Apple’s business, the coronavirus might eventually be a revenue booster for the iPhone maker.

“We are lowering our estimates for the Mar-20 quarter, but leaving estimates for all other future periods unchanged,” Michael Olson, a managing director of investment bank Piper Sandler, said in a note to clients on Tuesday, adding that the March quarter revenue shortfall will prove to be a stock buying opportunity. “In fact, the iPhone supply constraints in the current quarter could result in pent-up demand for future quarters.”

Olsen’s bullish outlook was echoed by Morgan Stanley’s Katy Huberty. “The March quarter shortfall is entirely tied to labor, rather than component, constraints and Apple doesn’t expect any meaningful component cost inflation at this time,” she explained in a client note also on Tuesday. “A larger than expected demand-related shortfall will just increase estimates in future quarters as we don’t view demand as perishable in light of strong retention rates among iPhone owners.”

Piper Sandler has a $343 price target for Apple shares, and Morgan Stanley has a $368 target. (Apple is currently trading at $324.) Both firms have an “overweight” rating (the highest rating for a stock’s attractiveness) on the stock.

Apple’s main supplier, Foxconn, has manufacturing facilities in central and southern China. Plants making Apple devices resumed work partially on February 9 after closing for the Chinese New Year. Depending on the progress of COVID-19 control, it’s unclear yet when Foxconn will bring production back to full speed.

Why Some Wall Street Banks Believe Coronavirus Is Actually Good News for Apple