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Apple unlikely to meet sales target due to coronavirus impact in China

The illness has killed 1,770 in China and stricken some 70,500 people


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Shares of Apple fell over 2 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 the outbreak was pressuring its supply chain.

The drop in Apple’s stock is set to wipe nearly $30 billion off its market capitalisation, just as it was inching closer to $1.5 trillion in value. The stock was trading down at $315.90. chartHowever, 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 $63 billion to $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 $58 billion and $60 billion, with a 12 per cent contribution from Greater China. chartManufacturing 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 will mean fewer iPhones available for sale.

One of the primary iPhone manufacturing facilities in China is operating at a 25 per cent factory utilization rate as many workers remain absent, Cowen analysts estimated. “We believe utilisation rates will improve linearly over the next several weeks to 50 per cent by mid-March and followed by a big improvement in late March to normal levels.”

Brokerage Canaccord Genuity expects Apple to sell 38 million iPhone units during the current quarter, eight million less from its earlier estimate.

Samsung to benefit

Samsung Electronics stands to be a major beneficiary of the China production problems announced by rival Apple, reaping the rewards of a decade-long bet on low-cost smartphone manufacturing in Vietnam. Huawei, too, has not announced any production problems.

First Published: Tue, February 18 2020. 08:55 IST