FEBRUARY 18, 2020
A string of US companies have been cautioning investors that first-quarter sales could take a hit from the spread of coronavirus. Apple just made it all more real.
The $1.4 trillion company put out an investor update Monday, warning that it no longer expects to meet the revenue guidance provided last month.
Notably, the company isn’t just concerned about a hit to demand for Apple products within China — which had been expected, since all its stores there have been closed. It also faces issues with iPhone production. Such supply chain issues have been a chief concern for economists tracking broader fallout from the new coronavirus.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said.
Apple said that even though its manufacturing partner sites are located outside the Hubei province at the center of the outbreak, and all those sites have reopened, ramping back up has been difficult.
JPMorgan analyst Samik Chatterjee told clients that the long-term outlook for the company “remains unchanged.” The likely debut of 5G-enabled iPhones later this year is still poised to boost demand, and Apple is less reliant on selling iPhones in China than it was a year ago, he said.
But investors are wary. Shares of Apple fell 2.8% Tuesday, wiping out $34 billion in market value and dragging US stocks lower across the board. Hong Kong’s Hang Seng closed down 1.5%.
“It’s a supply chain issue as well as an in-China sales issue,” Nicholas Hyett, an equity analyst at Hargreaves Lansdown, told me. “That’s what makes it different from what we’ve seen before.”
Piling on: HSBC and mining giant Glencore also talked about how the coronavirus could hurt their business on Tuesday. Glencore CEO Ivan Glasenberg maintained that it’s “a bit too early” to nail down the impact, but noted that China has effectively taken two extra weeks after the Lunar New Year holiday to get back up and running. No shipments have been canceled, he said.