Apple warns sales to fall short of target due to coronavirus impact

apple-warns-sales-to-fall-short-of-target-due-to-coronavirus-impact

Inc (AAPL.O) warned on Monday it was unlikely to meet its guidance set just three weeks ago as the world’s most valuable technology firm became one of the biggest of China’s coronavirus epidemic.

The rapidly spreading virus has killed nearly 1,900 in China and stricken some 72,000 people, confining millions to their homes, disrupting supply chains and delaying reopening of factories after the extended Lunar New Year holiday break.

Manufacturing facilities in China that produce and other electronics have begun to reopen, but they are ramping up more slowly than expected, Apple said. That will mean fewer iPhones available for sale around the world, making Apple one of the largest Western firms to be hurt by the outbreak.

Some of its retail stores in the country remain closed or are operating at reduced hours, which will hurt sales this quarter. China accounted for 15% of Apple’s revenue, or $13.6 billion, last quarter, and supplied 18% of revenue in the year-ago quarter.

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. It did not offer a new revenue estimate nor provide a profit forecast on Monday.

“The magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared,” Wedbush analyst Daniel Ives wrote in a note.

Apple, worth $1.4 trillion by market capitalization, could face a torrid market reaction on Tuesday, when Wall Street reopens after the Presidents Day holiday, analysts 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,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Shares of its Asian suppliers fell on the , with Samsung Electronics (005930.KS) losing 2.4%, Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW) down 1.8% and SK Hynix (000660.KS) shedding 3.3%.

Analysts have estimated that the virus may slash demand for smartphones by half in the first quarter in China, the world’s biggest market for the devices.

SHORT-TERM IMPACT?

Apple said it will reopen China stores “as steadily and safely as we can,” while global supplies of iPhones will be limited as manufacturers work toward operating plants at full capacity. It plans to provide more information in April, when it releases first-quarter results.

Wedb


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