Apple sees $27 billion of market value wiped out amid delayed reopening of Chinese iPhone plants

  • Apple saw as much as $27 billion in market value wiped out on Monday following reports of its Chinese iPhone factories facing delays in returning to full production.
  • Foxconn recently gained permission to reopen its Zhengzhou plant, Reuters reported Monday, 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 from its production halt is a “mathematical gymnastics exercise,” Wedbush analyst Dan Ives wrote Sunday.
  • Watch Apple trade live here.

Apple saw as much as $27 billion worth of market cap erased on Monday following reports of its Chinese iPhone factories 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 gained permission to open its Zhengzhou plant, Reuters reported, but only 10% of the factory’s employees have returned to work.

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 Monday trading.

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 forecast a budget iPhone arriving as early as March.

Reliable Apple analyst Ming-Chi Kuo already slashed his forecast for iPhone shipments in the first quarter by 10%, citing the coronavirus outbreak for the sizable disruption.

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Trying to quantify the sales hit caused by the outbreak is a “mathematical gymnastics exercise,” Wedbush analyst Dan Ives wrote in a Sunday note. The research firm expects 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’ spreading beginning in late January, and has since claimed more than 900 lives and infected more than 40,000. Two of the deaths have taken place outside of mainland China, with one victim in Hong Kong and another in the Philippines.

The Cupertino, California-based company issued “wider-than-usual” guidance for its second quarter in its January 28 report, noting coronavirus uncertainties could harm device shipments if the 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 affect 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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