Apple will miss its sales forecast for the current quarter, just a few weeks old, due to the Corona virus outbreak in China.
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There are supply bottlenecks for iPhones because production in China is ramping up more slowly than planned, the company said on Monday after the US exchange closed. In addition, sales of Apple devices in China have recently been subdued, as many stores – and also the company’s stores – were temporarily closed and had been poorly visited.
For these reasons, it was not possible to keep the sales forecast for this quarter given until the end of January. Apple had already given an unusually wide range of $ 63 billion to $ 67 billion, referring to coronavirus risks. There was no new forecast now. The restrictions on the business are only temporary, the group emphasized. Apple had $ 58 billion in revenue in the prior-year quarter.
The factories of Apple manufacturers such as Foxconn and Pegatron as well as the most important suppliers are located outside the province of Hubei, which is particularly affected by the new lung disease Covid-19. But elsewhere in China, the traditional Chinese New Year holidays have been extended to avoid spreading. All production plants were running again. But: “The iPhone supply bottlenecks will temporarily affect sales worldwide.”
The situation is in flux – and more information on the effects on Apple business should only be available with the figures for the current quarter in April.
In China, only some of the more than 40 Apple stores were reopened with shorter opening hours, but online sales continue. At the moment, however, life in large parts of the country is affected by the coronavirus outbreak. China is an extremely important market for Apple: In the past financial year, the group did 17 percent of its business there. The “Greater China” business region also includes Hong Kong and Taiwan. In Hong Kong in particular, sales had recently dropped because the ongoing protests had deterred wealthy tourists.
It’s the second time in a year that Apple has had to cut its sales forecast – most recently it was for the Christmas quarter of 2018, when Apple blamed the slowdown in the Chinese economy for weaker-than-expected iPhone sales. In January 2019, many analysts then fundamentally doubted the success of the iPhone business. In the Christmas quarter 2019, however, the group was able to clear the concerns with record numbers.
Apple is not the only electronics provider to be affected by coronavirus episodes. Nintendo warned of bottlenecks in its Switch game console at the beginning of February because some components from China were scarce.
Analysts see only a temporary impact on business. Amit Daryanani of Evercore is simply expecting demand for Apple products to shift later in the year. Daniel Ives from Wedbush does not see the long-term business prospects affected either.
This is how the Apple share reacts
After a sales warning as a result of the coronavirus epidemic, Apple’s stocks fell significantly on Tuesday in pre-exchange US trading.
Before trading on Wall Street started regularly again after the holiday at the start of the week, the technology group’s shares on the Nasdaq had already gone down 3.14 percent to $ 314.76 compared to the closing price on Friday.
As of right now, this news is pushing the stock price below the short-term 20-day line at $ 319 important to investors. Already at the end of January the rocket-like price increase – after six months – had lost momentum. Overall, the papers recorded an increase in value of 230 percent since the interim low in early 2019.
For Markets.com’s Neil Wilson, it is completely incomprehensible how anyone could be surprised by this development. It was clear that the corona virus would cut production and consumption in the world’s second largest economy. Apple is here the indicator for the future development of the profits of the companies affected.
It is similar among analysts. Despite the bad news, none of the experts changed their recommendation for Apple stock, although some price targets were adjusted. This is “not nice, but not a broken leg and, given the deserted streets in China, not a big surprise either,” said expert Ingo Wermann from DZ Bank.
According to analyst Samik Chatterjee from the US bank JPMorgan, nothing changes in the long-term scenario with regard to Apple. So there should be a great demand for 5G-capable iPhones. However, the problems of the first quarter are likely to continue to affect the second quarter.
/ So / DP / stw
CUPERTINO (dpa-AFX)
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Image source: pio3 / Shutterstock.com, Vividrange / Shutterstock.com, Adam Berry / Getty Images
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