Could the coronavirus outbreak hurt Apple's shares?

Shares of Apple are under pressure as analysts raise concerns about the coronavirus' impact on iPhone shipments.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

With one of its manufacturing hubs situated at the epicenter of the coronavirus outbreak, Apple (NASDAQ: AAPL)'s stock has been under pressure recently as analysts and investors ring the alarm bells about the impact outbreak could have on its iPhone sales. 

Many of Apple's gadgets are assembled in Shenzhen and Hengyang, China, but they are shipped from Wuhan, China, where the virus is believed to have originated. With most of the city in quarantine and with the outbreak spreading around the world, worries are growing that it could affect iPhone shipments. As of this writing, there are more than 28,000 cases of coronavirus just in China with 566 deaths worldwide.

TF Securities analyst Ming-Chi Kuo, who has made accurate calls on Apple's manufacturing and shipments in the past, was the most recent analyst to express concern about the company's financial situation. In a note to clients this past weekend, the analyst warned that during the current quarter Apple could see shipments down 10% because of the coronavirus. 

Kuo now expects Apple to ship between 36 million and 40 million iPhones during the current fiscal second quarter, compared to the 38 million Kuo estimates Apple shipped in last year's first quarter. As for the fiscal third quarter, Kuo isn't sure how shipments will be impacted by the uncertainties around the coronavirus epidemic and how that will affect consumer confidence.

Coronavirus could squelch Apple's iPhone momentum 

That call was a blow to Apple's stock, which fell earlier in the week but has recouped some of the losses. If shipments are impacted by the events resulting from the coronavirus, it will hurt the momentum that Apple and the iPhone have regained over the past six months. In its fiscal 2020 first quarter, which it posted in late January, Apple reported iPhone sales of $55.96 billion, which was up 8% year over year and higher than the $51.92 billion Wall Street was expecting. That was driven by what CEO Tim Cook called on an earnings conference call "exceptional" demand for the iPhone 11, iPhone 11 Pro, and the iPhone 11 Pro Max. Cook said the iPhone 11 was the top-selling model every week during the December quarter.

But Cook did warn on an earnings conference call that the coronavirus is having an impact. He said Apple has closed one of its retail stores in Wuhan and a number of channel partners have also shuttered their stores. Those that are still open have reduced operating hours.

"While our sales within the Wuhan area itself are small, retail traffic has also been impacted outside of this area across [China] in the last few days," Cook said. "We have attempted to account for this in our guidance range that we've provided you."

Apple expects revenue to be between $63 billion and $67 billion for its fiscal 2020 second quarter, which is wider than usual and reflective of the uncertainty related to the coronavirus outbreak.

Wall Street sounds the alarms 

TF Securities analysts aren't the only ones warning about the impact the coronavirus may have on Apple's iPhone shipments and thus its stock price. Wedbush Securities analyst Daniel Ives cautioned that if the virus isn't contained by the middle of February, consumers may see delays of up to two weeks on orders for new iPhones. If it spills into March, the negative impact will be even greater.

The analyst warned it could even hurt shipments and sales of the iPhone SE2, which Apple is rumored to launch in the spring. The next iteration of the SE, the SE2 is a cheaper model that has the same chip as the higher-end iPhones and targets cost-conscious consumers. Delays in shipments of that phone could materialize if the virus isn't contained by the spring.

All of this means that investors in this tech stock should prepare for more declines in shares of Apple if the coronavirus isn't contained soon.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

Donna Fuscaldo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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