Apple (AAPL) Lifts Online iPhone Sales Limit Amid Coronavirus Woes

Apple AAPL has removed the purchase limits applied to iPhone, new iPad Pro and new MacBook Air in countries outside of China, per a Reuters report.

As customers are unable to access brick-and-mortar stores due to the coronavirus outbreak, the iPhone maker is now allowing them to purchase more than 10 iPhones on its online platform.

The pandemic is having a major impact on the entire tech industry, with disruption in supply chains and closed production facilities resulting in price hike and short supply of devices.

Last week, the iPhone-maker had limited bulk purchases of iPhones and other products to two devices per order as it faces supply constraints related to the global pandemic, per a Reuters report.

It may well have been that there was a supply-chain issue that has been resolved, or that demand is now falling faster than the company expected.

Notably, all physical Apple Stores outside China remain closed indefinitely. In such scenario, Apple’s non-iPhone businesses, particularly Services and Wearables, are expected to drive top-line growth in fiscal 2020 and beyond.

Can Services & Non-iPhone Devices Aid Apple?

Apple currently has more than 480 million paid subscribers across its Services portfolio. App Store continues to draw the attention of prominent developers from around the world, helping the company offer appealing new apps that drive traffic.

Notably, Apple Music currently has more than 60 million paid subscribers. Moreover, it offers more than 60 million songs, with world class music experts and taste makers curating thousands of playlists and daily selections in 115 countries.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

In the first quarter of 2020, Services (13.8% of sales) revenues grew 16.9% from the year-ago quarter to $12.72 billion.

Recently, Apple received a waiver from the U.S. Trade Representative (USTR), which excluded its smartwatch from tariffs imposed on exports from China, approved in a letter posted to the USTR website dated Mar 20.

The U.S. trade representative has granted Apple’s tariff waiver request for Apple Watch smartwatches, enabling the company to import the finished devices from China without paying a 7.5% duty, per a Bloomberg report.

The iPhone-make claimed that it was not able to find a source outside of China to meet demand for Apple Watch production in 2020.

In first-quarter 2020, Wearables, Home and Accessories sales surged 37% year over year to $10.01 billion and accounted for 10.9% of total sales.

Wearables grew 44% year over year driven by strong demand for AirPods and Apple Watch. Moreover, Apple Watch’s adoption rate grew rapidly. Notably, more than 75% of customers who purchased Apple Watch during the reported quarter were first-time customers.

Notably, Apple Watch was subject to the latest round of tariffs in the U.S.-China trade war, which were cut to 7.5% from 15% in a trade deal signed in February 2020.

In November 2019, the tech giant asked the U.S. government to exclude the Apple Watch, iMac, AirPods, and iPhone components from tariffs on goods imported from China, and the Apple Watch has been exempted.

Additionally, the company applied for tariff waivers on other products including Beats Pill+ wireless speaker, Beats wireless earbuds, iPhone smart battery case, the charging case for AirPods and the PowerBeats, storage components for the Mac Pro, and batteries for the iPhone and MacBook.

Further, per a Bloomberg report, the 5G iPhone expected to release this fall hasn't been impacted by supply chain constraints just yet, since mass production doesn't typically begin until May.

Zack Rank & Stocks to Consider

Apple currently carries a Zacks Rank #3 (Hold).

Microsoft Corporation MSFT, Garmin Ltd. GRMN and Applied Materials, Inc. AMAT are some better-ranked stocks in the broader technology sector. While Microsoft and Garmin sport a Zacks Rank #1 (Strong Buy), Applied Materials carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Intel, Applied Materials and Garmin is currently pegged at 7.5%, 9.9% and 7.4%, respectively.

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