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According to UBS analysts, Apple’s first fiscal quarter may be impacted by issues with holiday iPhone sales. Factory disruptions caused by COVID lockdowns in the December quarter, leading to “significantly long wait times” for the iPhone 14 Pro and Pro Max models, are the main root of the problem.

The escalation happened in November, leading to wait times of 34 days for some Pro models in the U.S. and 36 days in China. One of the biggest China-based Foxconn factories, the Zhengzhou factory, made news after workers resorted to violence to complain about pay and COVID.

The UBS analysts think, however, that wait times for Pro models have steadily gotten better, based on what Apple has said about the situation. While the holiday sales for the iPhone may have been impacted, the silver lining is that strong currencies against a weaker dollar may have helped Apple’s overall financial situation.

UBS forecasts that Apple will have shipped 79 million iPhones in Q1 2023, which is a little below the consensus of 80 million but far higher than the lowest estimate of 74 million. There’s another positive expectation when it comes to year-on-year sales, despite the 3% decline that UBS predicts.

According to UBS, Apple will manage to ship 232 million iPhones in 2023, which is a little short of the consensus of 238 million but still not too bad given the financial climate. The problems in the Zhengzhou factory and the longer wait times for iPhone Pro models have had little impact on Apple’s overall distribution diversity across its portfolio of models. Roughly 56% of iPhones sold in the U.S. in the December quarter were Pro models.

UBS estimates that if there is a 5 million iPhone shortfall compared to the forecast, it would result in a $1.7 billion loss in pre-tax income and a $0.10 decrease in earnings per share (EPS), based on an ASP of approximately $850 and a 40% contribution margin for the iPhone business. The expected revenue and EPS are set at $120.3 billion and $1.93, respectively, which are lower than the consensus estimates of $122.9 billion and $1.96.

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