Apple iPhone Sales Could Get Hit by Coronavirus - Barron's

Photograph by Justin Sullivan/Getty Images

There is growing reason to expect Apple to suffer material impact to its financial results from the still unfolding novel coronavirus crisis.

Foxconn, Apple’s most important contract manufacturer, was originally supposed to resume production Monday after a recent forced shutdown. But there were reports over the weekend that the factories will remain closed for some time to come.

Reuters reports Monday that China declined Foxconn’s request to reopen its production plant in the city of Shenzhen today, and that employees were also not to return to work on Tuesday. In a separate story, Reuters reported that the company received approval to reopen its plant in Zhengzhou, but that only 10% of the factory’s workforce has been able to return to work.

Wedbush analyst Dan Ives asserted in a research note over the weekend that once production resumes, it could take 1-2 weeks to return to full production. And that could be an issue for Apple.

“Let’s not sugarcoat it: if true, this production news out of China over the weekend will be a shock to the system and disrupt the supply chain further for Apple on both its core iPhone franchise and AirPods unit production, which is already facing a short supply heading into this week,” he writes. “On the retail front, Apple has now extended delays of its 40+ stores throughout China until February 15 due to the coronavirus fears that were also supposed to open tomorrow along with its corporate offices in the region.”

Ives estimates that for every week that Foxconn is down, about 1 million phones are likely to shift our of the March quarter and into the June quarter. Ives had been forecasting March quarterly sales of 44 million iPhones, but thinks the total could drop by between 3 million and 5 million phones if the shutdown stretches on. AirPods were already subject to supply constraints, with one month wait times for AirPods Pro orders on Apple.com.

On its recent earnings call with investors, Apple warned that its wider-than-usual guidance for the quarter reflected uncertainty about the impact of the virus. Ives thinks the company can still hit his estimate of $65 billion in sales, in the middle of Apple’s guidance range of $63 billion to $67 billion.

Despite the virus issue, Ives remains bullish on Apple shares. “We view this more as a timing issue from March to June rather than lost iPhones for the year and thus our bullish longer-term 5G super cycle thesis remains well intact,” Ives writes.

Apple this morning is down 0.9% to $317.17.

Write to Eric J. Savitz at eric.savitz@barrons.com

Let's block ads! (Why?)

https://www.barrons.com/articles/apple-iphone-sales-could-get-hit-by-coronavirus-51581349156

2020-02-10 15:39:00Z
CBMiXGh0dHBzOi8vd3d3LmJhcnJvbnMuY29tL2FydGljbGVzL2FwcGxlLWlwaG9uZS1zYWxlcy1jb3VsZC1nZXQtaGl0LWJ5LWNvcm9uYXZpcnVzLTUxNTgxMzQ5MTU20gFgaHR0cHM6Ly93d3cuYmFycm9ucy5jb20vYW1wL2FydGljbGVzL2FwcGxlLWlwaG9uZS1zYWxlcy1jb3VsZC1nZXQtaGl0LWJ5LWNvcm9uYXZpcnVzLTUxNTgxMzQ5MTU2

Bagikan Berita Ini