Analysts expect sales for Apple’s (APPL) 5G-enabled iPhone, which may see a delayed launch this year, will be exceptionally low as the tech giant will be negatively impacted by COVID-19 and severe job losses.
Logan Purk, analyst at Raymond James, said in an interview that there will be weakness in Apple product sales in the current and next quarter, which will reflect the immediate impact of potential job losses. Most of the recently unemployed won’t be buying new phones.
“If big markets remain weak in the fall and unemployment is high, [Apple] certainly is going to see weaker demand for a most likely thousand dollar plus phone,” Purk said.
He said that this is still speculation and it is hard to determine what the economic environment could look like in the fall, and if things start picking up and restoring itself then Apple might be safe.
“If the current case curves, and follow say South Korea, we could be back to normal and sales could be okay. It could probably still be impacted a little bit,” Purk said.
He added that customers in need of a new phone will most likely buy down.
“Usually when Apple launches a new flagship phone, they have their previous models or lower models at a lower price point,” he said. “I think that’s where you would see more activity as customers looking to save some money but still want a new phone.”
Typically, Apple will launch new products in September, but the tech giant has not indicated whether or not the event will continue.
Daniel Howley, Yahoo Finance technology editor, said that the company may still have an event and give customers a preview of what will be launched, but won’t launch the phone until later.
Gene Munster, an analyst at Loup Ventures, said in an interview that the upcoming release of Apple’s 5G-enabled iPhone will be foundational to the tech giant for the next five years.
“I believe Apple will announce the phone this year, but there may be conditions around the release that is unique in terms of production or availability initially,” he said.
Munster noted that Apple will be hit in the market but will be “less negatively impacted than the overall market.”
“Their products are more expensive than most products and when people lose their jobs the demand in the near term will be negatively impacted,” he said.
“Eventually they’re going to come back, and eventually Apple will win customers over as 5G customers. The 5G rollout will be slower than people think, 2021 is not going to be the nirvana year for 5G, it’s probably going to be 2022 or 2023.”
Apple expected to re-open retail stores in April
The tech giant recently indicated in an internal memo that it was planning to re-open its stores outside of Mainland China as early as April, as reported first by Bloomberg.
Purk said that even if stores open, it doesn’t mean people will come and shop.
“That’s what we are seeing in China right now. All their stores are open there, but foot traffic is still low. There is still a concern about the virus,” he said.
While Purk noted that Apple has a seamless online shopping experience, it is not the biggest driver of overall sales growth.
Munster said that about eight per cent of total revenue comes through retail sales, and right now with stores shut Apple is taking about a one per cent revenue hit, just under US$3 billion.
“The reality is that when people go in store, they tend to have a higher conversion, higher tie over with other products, in other words, I could have had [the] intention of going in and buying an iPhone and I end up buying an iPhone and AirPods. When I’m buying online, it’s less likely that I walk out with two products,” he said.