Lately, Apple (NASDAQ:AAPL) stock has been hit hard. The coronavirus outbreak disrupted the global supply chain and dented the demand and supply of the company’s iPhones. The broader equity markets have also crashed amid fear and uncertainty related to the outbreak. Apple stock fell by 4.14% on March 27 and closed at $247.74. At that closing price, Apple’s market value is around $1.08 trillion. Apple stock was trading about 24.4% lower than its new 52-week high of $327.85 attained on January 29, 2020. The stock is trading around 45.5% higher than its 52-week low of $170.27 on June 3, 2019. So far, Apple stock has fallen by 15.4% year-to-date.
Will coronavirus impact Apple’s iPhones
Apple has significant exposure in China, which is the largest smartphone market. China is also the epicenter of the coronavirus. Apple’s iPhone sales fell 28% in China in January. Notably, iPhone sales were down by over 60% in February.
Last month, Apple issued a warning to its shareholders that the coronavirus might limit its sales and disrupt its iPhone demand and supply. Like Apple, many US companies, including Microsoft (NASDAQ:MSFT), Gap (NYSE:GPS), Target (NYSE:TGT), Dell, and VMWare, have withdrawn their guidance due to coronavirus concerns.
On March 16, Apple decided to close all of its stores outside Greater China for several weeks to reduce the spread of the coronavirus. Previously, the company closed many stores in China amid the outbreak. However, the stores have reopened in China. US companies like Walt Disney and McDonald’s also stopped their operations in China in response to the outbreak. Many retailers like Gap, Macy’s, Nordstrom, and JCPenney have announced temporary store closures in the US due to the coronavirus pandemic.
To add to the woes, Apple expects a drop in iPhone orders for its March-ending quarter. There could be lower-than-expected buyers. According to a Reuters report on March 27, Apple’s iPhone orders might fall by 18% YoY in the second quarter of fiscal 2020 due to the coronavirus. An official from one of Apple’s major contract assemblers also stated that the company will postpone the production ramp-up for new phones. Meanwhile, Apple’s senior official is still hopeful about the scheduled launch of the 5G iPhones in the fall, according to the report.
iPhones impact Apple’s revenue
Apple derives most of its revenues from iPhones. The company wants to diversify and focus more on other divisions. The company generated $56 billion from iPhone sales in the first quarter of fiscal 2020. Notably, iPhone sales contributed around 61% of Apple’s total revenue in the first quarter. The company expected its March-ending revenues to be $63 billion to $67 billion. However, Apple doesn’t expect to meet its revenue goals for the current quarter amid widespread coronavirus risk.
Foxconn, which is one of Apple’s suppliers, has also suffered amid the coronavirus pandemic. Foxconn reported its worst monthly revenue in about seven years in February. According to the company’s monthly sales report, its revenues fell around 18.13% in February 2020 following a sales decline of 12% in January 2020. Foxconn also slashed its outlook for the first quarter of 2020 earlier this month. The company expects its revenue to decline by more than 15% in its electronics and telecommunications segment in the first quarter. Meanwhile, Foxconn expects a recovery after the production stabilizes in China.
Analysts’ growth projections
For the second quarter, analysts expect Apple’s revenues to decline by 2% YoY. Meanwhile, Wall Street analysts expect the company’s fiscal 2020 revenues to only grow by 3.35% YoY. Analysts expect an improvement of 12.65% YoY in the company’s revenue growth in fiscal 2021. In comparison, Apple’s sales declined by 2.04% YoY in fiscal 2019.
Wall Street analysts expect the company’s adjusted EPS to fall by 1.76% YoY for the second quarter. Analysts expect Apple’s fiscal 2020 EPS to grow by 7.87% YoY. They expect an improvement in the EPS growth of 18.86% YoY in fiscal 2021. In fiscal 2019, Apple’s adjusted EPS fell by 0.17% YoY.