Apple (NASDAQ:AAPL) shares were trading more than 11 points lower in pre-market hours trading Tuesday, after the company warned that disruption in China from the coronavirus will affect expectations for the quarter ending in March.
Apple said production and sales were affected and that “worldwide iPhone supply would be temporarily constrained”. Store closures in China are also expected to have a significant impact on the company’s bottom line. Apple closed all 42 of its China stores last month and most have yet to reopen.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the $1.4 trillion market cap company said in a statement.
Apple did not reveal the likely impact. “We do not expect to meet the revenue guidance we provided for the March quarter,” the company noted in the statement, adding that while its manufacturing facilities have re-opened since the extended Lunar New Year holiday, the production it’s not resuming as fast as it had initially expected, leading to “iPhone supply shortages.”.
Apple has large exposure to China in terms of revenues and production. In fact, around 15% of the company’s revenue gets generated from the region and most of its products – almost everything from laptops to smartwatches, including the iPhone, which is Cup[ertino’s biggest revenue generator – is made there.
Analysts have estimated that the virus may significantly slash demand for smartphones in Q1 in China. According to CNBC, JPMorgan expects Apple to report revenue of $60 billion in the March quarter. The company had forecast revenues of up to $67 billion in the current quarter.
As of 7:46 a.m. EST, Apple’s shares were down 3.17% from Friday’s closing price.
Ticker is up 11% year-to-date and 90.6% year-over-year. AAPL trades in a 52-week range of $169.49 to $327.85. The average consensus price target for the name is $334.45.