Coronavirus outbreak threatens Apple supply chain, sales

MUNSIF VENGATTIL and SUPANTHA MUKHERJEE

Shares of Apple Inc fell nearly two per cent on Tuesday and dragged the stocks of its suppliers across the globe lower, after the iphone maker warned of lower sales in the current quarter, acknowledging that the coronavirus outbreak was pressuring its supply chain.

The drop in Apple’s stock erased nearly US$30 billion off its market capitalization, just as it was inching closer to US$1.5 trillion in value. The stock fell 1.83 per cent to close at US$319 in New York.

However, several Wall Street brokerages dubbed Apple’s update forecast as a “near-term headwind,” saying the company is performing strongly outside China and the launch of 5G phones later this year would further boost sales.

“We believe any material weakness in Apple shares as a result of the March 20 quarter revenue shortfall will prove to be a buying opportunity,” analysts at Piper Sandler wrote in a client note. “The iphone supply constraints in the current quarter could result in pent-up demand for future quarters.”

In late January, Apple had forecast US$63 billion to US$67 billion in revenue for the quarter ending in March. It did not provide a new revenue estimate or a profit forecast on Monday.

Venture capital firm Loup Ventures expects March quarter revenue to be in the range of between US$58 billion and US$60 billion, with a 12-per-cent contribution from Greater China.

Manufacturing plants in China that produce Apple’s iphone and other electronics have begun to reopen, but they are ramping up more slowly than expected, Apple said on Monday.

That situation will mean fewer iphones available for sale.