AP Photo/Ng Han Guan
- Apple saw as much as $27 billion in market value erased on Monday following reports that its Chinese production line is limping to full production after a weeks-long shutdown.
- Foxconn recently got permission to reopen its Zhengzhou plant, Reuters reported, but only 10% of its employees have returned to work, and other factories remain closed.
- The hit to Apple’s supply chain “will be a shock to the system,” and any attempt to quantify the financial fallout of its production halt is a “mathematical gymnastics exercise,” the Wedbush analyst Dan Ives wrote on Sunday.
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Apple saw as much as $27 billion in market value erased on Monday following reports that its Chinese iPhone factories were resuming production at a sluggish pace.
Foxconn, the world’s largest contract device manufacturer and a key element of Apple’s supply chain, was forced to shut down operations for weeks following an extended Lunar New Year holiday and the escalating coronavirus outbreak. The company recently got permission to open its Zhengzhou plant, but only 10% of the factory’s employees have returned to work, Reuters reported.
Foxconn hasn’t yet been allowed to open its Shenzhen factory, a source familiar with the matter told Reuters. Employees at the Shenzhen plant were told to stay home from work on Tuesday, and authorities are expected to examine the closed facility later this week, according to Reuters.
Apple stock slumped as much as 1.9% in early trading on Monday.
The two factories account for most of Apple’s iPhone production, and the weeks-long delay could bite into the company’s upcoming earnings if device supply can’t meet demand. The company is expected to reveal its first 5G-capable iPhone lineup in the fall, though other reports have forecast a budget iPhone arriving as early as March.
Ming-Chi Kuo, a reliable Apple analyst, had already slashed his forecast for iPhone shipments in the first quarter by 10%, citing the coronavirus outbreak for the sizable disruption.
Trying to quantify the sales hit caused by the outbreak is a “mathematical gymnastics exercise,” the Wedbush analyst Dan Ives wrote in a note on Sunday. The research firm expects that full production won’t resume for another one or two weeks and that the supply-chain hit “will be a shock to the system.” Ives’ note came before Reuters reported the opening of one iPhone plant on Monday.
Ives holds an “outperform” rating for Apple shares, with a price target of $400 per share.
The virus and claimed more than 900 lives and infected more than 40,000 people since December. Two of the deaths were outside mainland China: one in Hong Kong and another in the Philippines.
Apple issued “wider than usual” guidance for its second quarter in its January 28 report, noting that uncertainties could harm device shipments if the coronavirus outbreak isn’t contained in a timely fashion. Apple shares reached new highs following the report’s release but have since fallen modestly as markets digest the outbreak’s effect on global growth, supply chains, and future guidance.
Apple closed at $320.03 per share on Friday.
The company has 28 “buy” ratings, 16 “hold” ratings, and four “sell” ratings from analysts, with a consensus price target of $336.49, according to Bloomberg data.
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