The Dow Jones Industrial Average (DJINDICES:^DJI) was rallying Wednesday morning, up 1.6% at 11:15 a.m. EDT. U.S. Treasury Secretary Steven Mnuchin told Fox Business Network that he expects most of the U.S. economy to be reopened by later in the summer. That may be giving investors reason to be optimistic, but the pace of the post-pandemic economic recovery remains highly uncertain.
Shares of Apple (NASDAQ:AAPL) and Coca-Cola (NYSE:KO) were up in the morning thanks to some analyst commentary. One analyst expects Apple's budget iPhone SE to be a big seller in a weak demand environment, and Coca-Cola was defended after the company disclosed a double-digit volume decline for April.
Apple may have a hit on its hands
Despite supply chain disruptions that could delay the expected launch of 5G-enabled iPhones later this year, Apple managed to bring the budget-conscious second-generation iPhone SE to market. The $399 smartphone, which features a small 4.7-inch screen and a $399 price point, will be available at select retailers on April 24.
This low-cost iPhone comes as demand for a wide array of products and services is plummeting due to the novel coronavirus pandemic and the economic impact of the measures put in place to contain the virus. Overall smartphone sales in the U.S. will almost certainly decline in the coming months, and Apple won't be immune. Analyst Ming-Chi Kuo expects iPhone shipments in Apple's June quarter to drop by as much as 25% from the prior-year period.
Kuo is more optimistic about the iPhone SE. Based on shipping times, the analyst believes the new iPhone is selling better than expected. Customers could be turning to lower-cost devices due to economic uncertainty, or there could be pent-up demand for an iPhone with a smaller form factor.
With the iPhone SE $300 cheaper than the iPhone 11, the new budget phone may come with lower margins for Apple. During a time when sales of high-end phones will likely be weak, the tech giant's bottom line could take a significant hit even if the iPhone SE is a home run.
Apple is scheduled to report its fiscal second-quarter results on April 30. The company is unlikely to provide much in the way of guidance, given the extreme uncertainty, but investors should get a better idea of how demand for the iPhone SE is shaping up at that time. Apple stock was up 1.8% by late morning.
Analyst defends Coca-Cola
Beverage giant Coca-Cola beat analyst estimates across the board when it reported its first-quarter results on Tuesday, but the company's commentary on sales trends was troubling. Coca-Cola said that sales volume was down roughly 25% globally in April, driven by a steep drop in demand from away-from-home channels.
Analyst Sean King of UBS defended Coca-Cola on Wednesday, saying that the long-term story hasn't changed. King sees Coca-Cola overcoming its short-term challenges, and he views the company's organic growth potential and free cash flow generation as reasons to buy the stock.
King expects Coca-Cola to navigate this difficult environment by prioritizing core SKUs, rapidly building out its delivery and e-commerce capabilities, adjusting format and pricing, and reducing spending. The analyst sees Coca-Cola emerging from this crisis with its strength intact.
UBS maintained its buy rating on Coca-Cola stock, despite the plummeting demand, although its new price target of $54 is $1 lower than before. Shares of Coca-Cola were up 0.9% by late morning.