Apple’s AAPL iPhone sales have taken a hit in China due to the ongoing coronavirus outbreak.
Per a Bloomberg report, demand for the product fell 28% month over month in January, according to a UBS research note citing China’s official data.
Last week, Apple revised its March quarter revenue guidance, stating that it will be unable to meet current expectations. Earlier revenue projections for the tech giant’s fiscal second-quarter 2020 were between $63 and $67 billion.
Apple stated the closure of its stores as well as limited hours and low customer traffic as reasons that negatively impacted demand for its products in mainland China.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
Apple’s iPhone Demand & Supply Compromised
The coronavirus is having a ripple effect on businesses across the globe as the world’s most populated country and the second-largest economy shut down cities to contain this contagion. This is impacting supply chains across industries and cutting demand in a massive consumer market.
Mobile phone brands shipped a total of 20.4 million devices in January, down 36.6% from 32.1 million in January 2019, according to data from China Academy of Information and Communications Technology.
Apple has been hit on both the supply and demand side. iPhone manufacturing plants were initially shut down outside Hubei (the ostensible region of origin of the coronavirus) and have been slow to ramp up production back to normal levels, which is impacting global iPhone supply, per BBC report.
The tech giant depends on a huge network of Chinese suppliers to provide key components for its main devices. For instance, Taiwan-based Foxconn, which makes iPhones and other gadgets on behalf of Apple, is yet to fully resume work across its plants in China though some of its facilities are operating at partial capacity.
All such suppliers will need to pass government inspections with their facilities disinfected with proper accommodation for potentially quarantining affected workers.
Moreover, Apple’s retail footprint in China is critical to the company’s sales revenues. In the first quarter, Greater China sales rose 3.1% from the year-ago quarter to $13.58 billion and accounted for 14.8% of total sales. Apple also stated that the Services segment grew at a double-digit rate in China.
Apple closed all 42 stores in the country last month. Nonetheless, the company is reopening more than half of its retail stores in China, trying to recover sales lost due to the coronavirus outbreak. Notably, 29 of Apple’s 42 retail stores in Mainland China have re-opened although many are operating for limited hours, per a Bloomberg report.
Zacks Rank & Other Stocks to Consider
Apple currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are NetEase, Inc. NTES and Quotient Technology Inc. QUOT, each sporting a Zacks Rank #1 (Strong Buy), and Alteryx, Inc. AYX, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Alteryx, NetEase and Quotient Technology is currently pegged at 50.6%, 41.9% and 20%, respectively.
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