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'Investors are getting worried about consumer demand,' says Bernstein's Sacconaghi - YouTube
Channel: CNBC Television
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tony welcome i actually look at supply
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chain for apple as an advantage because
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of its vertical integration its scale
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the way it buys priority with suppliers
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like corning but that doesn't
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necessarily mean that it should be
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trading at the multiple that it is now
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how much of a benefit do you give apple
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for its supply chain strength
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uh good morning john look apple has
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as you mentioned
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always
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had
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very strong supply chain management and
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sourcing
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they are pretty good about dual sourcing
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most of their products
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they have a
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relatively
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strong track record of being able to
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manufacture even in times of turmoil and
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and that's largely expected uh by the
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company i i think the the issue that you
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raised is we are in an unusual time
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coveted lockdowns are prevalent in china
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they were particularly prevalent in
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april and apple isn't anticipating that
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they will be impacted in terms of their
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ability to manufacture product in the
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quarter but i also think more broadly
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investors are getting worried about
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consumer demand uh that we may be
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entering uh into a period of slower
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economic growth
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that europe european demand is being
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impacted by uh the war in ukraine um and
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that
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as a result
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they don't feel quite as confident in
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the earnings outlook for apple as they
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did
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90 days ago now i guess the counter to
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that would be looking at for example
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walmart versus home depot earlier this
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week we saw
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a walmart doing more grocery business
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which is lower margin as people look for
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deals but on the higher end the home
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depot customer was buying less but they
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were paying more for what they really
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wanted to buy and isn't that apple's
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sweet spot with the m1 max with the
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iphones people are still going to need
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phones they're going to need
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laptops and computers if they're willing
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to pay a premium price performance wise
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does that play into apple's successful
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vertical integration up to this point
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well apple is has always been a a
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premium
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uh priced premium experience company
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whether it be their products or their
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services and so they do have very strong
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premiums to um to other products in the
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marketplace
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you know that said um
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apple really benefited i think in
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hindsight
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from
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consumers wallets during the pandemic
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people were not traveling people were
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not going out to dinner many were
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getting government subsidies and as a
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result they had money to spend on
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electronics on tablets on macs and to
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some degree on higher priced iphones and
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so i i think one concern is not only
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might we have a slowing overall economic
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environment for which apple is not
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immune
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but i think the other thing is is that
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we may have ultimately
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had
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excess demand for apple products above
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trend because the consumer was
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relatively flash and the converse is now
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true where the wallet size may be the
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same or even smaller for people who were
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getting subsidies
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and yet they're traveling uh they're
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going out to dinner and they're having
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more experiences and i and i you know
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when we look at apple i think in the
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preceding five years
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to last year fiscal 21 the company grew
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its ebit by about five percent of the
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year last year grew 66 percent
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why did that happen in part because
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consumers were flush i mean apple also
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had a great product lineup but consumers
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were flush and so the concern is we have
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both a potentially slowing economy and a
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slowing consumer spend but we also have
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um you know the risk that that apple
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consumers may have effectively forward
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bought
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last year
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