Apple unlikely to meet revenue guidance due to coronavirus impact

APPLE INC said on Monday (Feb 17) it would not meet its revenue guidance for the March quarter because of the coronavirus outbreak slowing iPhone production and weakening demand in China.

Apple’s manufacturing facilities in China have begun to reopen, but they are ramping up more slowly than expected, the technology company said in a statement to its investors.

Global supplies of Apple’s iPhones will be limited as the sites work toward operating at full capacity, the company said.

“These iPhone supply shortages will temporarily affect revenues worldwide,” the company said.

In January, Apple forecast US$63 bil to US$67 bil in revenue for the second quarter ending in March, ahead of estimates of US$62.4 bil.

The company said it would provide more information during its next earnings call in April.

Apple also said that store restrictions due to coronavirus precautions had affected its sales in China, with most retail stores either closed or operating at reduced hours.

“We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can,” the company said.

The disruptions follow a strong December quarter for iPhone sales, which were up for the first time in a year.

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 smartphones.

“While we have discussed a negative iPhone impact from the coronavirus over the past few weeks, 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’s stock is expected to face a knee-jerk reaction on Tuesday (Feb18), when Wall Street reopens after the Presidents Day holiday, Ives said.

Wedbush said it remained optimistic that Apple would be able to recover from the coronavirus setback.

“While trying to gauge the impact of the iPhone miss and potential bounce back in the June quarter will be front and center for the Street, we remain bullish on Apple for the longer term,” Ives said.

The outbreak is expected to intensify pressure on China’s economy, with multiple companies struggling to restart production after an extended Chinese New Year holiday.

Fiat Chrysler, Hyundai Motor Co and General Motors Co have all said their auto production lines were, or could be, hit by Chinese factories that are slow to restart because of the virus. – Feb 18, 2020, Reuters.

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