Apple shares slide after coronavirus guidance warning as its global suppliers are hammered - CNBC

Apple shares fell over 3% in pre-market trade on Tuesday after it warned that it does not expect to meet its own guidance for the March quarter because of the impact from the coronavirus.

The outbreak of the virus, which has killed over 1,800 people, also led to China's new year holiday being extended and factories and retail stores being shut for a longer period of time.

Apple said there was "a slower return to normal conditions than we had anticipated" pointing to issues around its supply and demand.

The U.S. technology giant has large exposure to China with around 15% of revenue coming from the region and most of its products, including the lucrative iPhone, being made there.

Apple said all its manufacturing facilities have re-opened in China but are "ramping up more slowly than we had anticipated" leading to "iPhone supply shortages."

All of its retail stores have been closed with some still remaining shut. The ones that have opened again are operating in a limited way with "very low customer traffic" which has hit demand.

A man cycles past a closed Apple store in Beijing on February 8, 2020.

Greg Baker | AFP | Getty Images

Analysts have reduced their revenue outlook and iPhone sales volumes for the coming quarter.

Barclays expects March quarter iPhone shipments to come in at 40.8 million versus its previous forecast of 44 million. The bank has reduced its June outlook from 36 million units to 33.8 million. It also cut its price target for Apple's stock from $304 to $297.

Meanwhile, JPMorgan lowered its iPhone volume expectations in a note on Tuesday to 39.5 million units in the March quarter versus a prior estimate of 47.5 million.

In terms of revenue, JPMorgan said it expects Apple to report revenue of $60 billion in the March quarter and earnings per share of $2.70 versus its previous estimate of $3.02.

In its fiscal first quarter earnings release last month, Apple had given wider-than-usual revenue guidance of $63 billion to $67 billion because of the uncertainty surrounding the coronavirus. However, Apple's didn't give revised guidance in its latest warning.

Morgan Stanley however expects the lost revenue in the March quarter to be pushed out to subsequent quarters.

"We assume Apple ends the March quarter with three weeks of iPhone channel inventory versus the normal six weeks, representing a $7.5B revenue shortfall in the quarter," the bank said in a note on Tuesday. "To be conservative, we assume 80% of the channel inventory rebuild plays out in the June quarter, with the remainder boosting September quarter revenue."

Apple's coronavirus warning sent ripples through global supply chain stocks. In Asia, Hong Kong-listed AAC Technologies, which makes haptics and acoustics components, fell more than 3.6%. Chipmaker TSMC was down nearly 3% while Samsung Electronics was also lower.

In Europe, Dialog Semiconductor slid over 4% while AMS, STMicro and ASML all fell.

— CNBC's Michael Bloom contributed to this article.

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2020-02-18 11:37:00Z
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