Daily Management Review

Coronavirus Outbreak Hit Apple Inc Among TheLargest Corporate Casualty


02/22/2020


Chinese manufacturing units of Apple and the Chinese market has been affected by coronavirus outbreak whereby affecting its Q1 sales target, although analysts remain hopeful for a recovery in the later quarters.



In the beginning of this week, Apple Inc has informed that most likely it will miss the sales target for March 2020 which was set only three weeks ago. This announcement came after the tech giant became one of the “biggest corporate casualties of China’s coronavirus epidemic”.
 
The virus continuous to spread rapidly whereby already claiming over 1900 lives in China and affecting nearly “72,000” more people, while forcing people to be confined in their homes, whereby “disrupting supply chains and delaying reopening of factories after the extended Lunar New Year holiday break”.
 
Even though, some of the manufacturing units of Apple in China which creates the iPhones as well as other electronics have re-opened but they are functioning at a slower pace than expected, informs the company. Likewise, Apple’s iPhone stock for sale is likely to take a hit which makes the company “one of the largest Western firms to be hurt by the outbreak” of coronavirus.
 
Moreover, some of the Apple retail stores in China will either remain closed or operate for shorter periods, whereby hurting sales in the Q1. The Chinese market accounted for fifteen percent of Apple’s revenue while it has brought in “$13.6 billion” in the last quarter and contributed to “18% of revenue in the year-ago quarter”.
 
According to Reuters:
“In late January, Apple had forecast $63 billion to $67 billion in revenue for the quarter ending in March, which it said was a wider than normal range due to the uncertainty created by the virus”.
 
However, no new estimates or forecast have been provided so far. While, a note of Daniel Ives, analyst at Wedbush, stated:
“The magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared”.
 
Mitsubishi UFJ Morgan Stanley Securities’ Chief Investment Strategist, NorihiroFujito said:
“If Apple shares were traded cheaply, that might not matter much. But when they are trading at a record high, investors will be surely tempted to sell”.
 
With the said news Apple’s Asian suppliers also witnessed a drop in their shares, as Reuters reported that Samsung Electronics lost “2.4%”, Taiwan Semiconductor Manufacturing Co fell by “1.8%” while SK Hynix dropped by “3.3%”. According to analysts’ estimates coronavirus outbreak may affect the demand for smartphone by 50%in China in Q1.
 
Apple Inc plans to open stores “as steadily and safely” as it can while further information might be provided in April, post the Q1 results. Wedbush has been optimistic about Apple’s chances of recovering from the blow. As Ives stated:
“While trying to gauge the impact of the iPhone miss and potential bounce back in the June quarter will be front and center for the Street, we remain bullish on Apple for the longer term”.
 
 
References:
reuters.com







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