Find out the latest on Apple’s revision and what this means for the company, consumer electronics, China and the world economy.
Three weeks ago, Apple suggested that its net sales for Q2 were going to be between $63 and $67 billion US. Today, it has updated that forecast and has stated that it now expects to come short of those predictions. The primary reason for the revision is the outbreak of the coronavirus and the knock-on effects this has for the global supply of iPhones as well as the lowered demand from Chinese consumers – many of whom are actively avoiding busy areas at all costs.
At the start of the month, Apple made the decision to close all stores for a temporary period in order to avoid making the outbreak of the virus any worse than it currently is. The move was also made by other multinationals including Starbucks and McDonald’s – both of whom will see impacts on their Q1 revenue sheets as a result of the coronavirus’ rapid spread and dangerous health risks.
How has the coronavirus impacted the global economy?
Some Stores Reopened
Despite the virus’ spread in China, Apple has made the decision to reopen some stores around the country that are relatively unaffected by the coronavirus, albeit with heavily reduced schedules as a precautionary measure and, more importantly, reduced demand from skeptical consumers who are worried about catching the virus.
The slashing of revenue guidance from Apple isn’t unprecedented: the same thing happened in Q1 2019 when, due to weak iPhone sales in the China region, they revised a range of $89 to $93 billion to $84 billion USD. It essentially came in right on the money with a Q1 report of $84.3 billion USD.
Factory Issues Could Damage Apple
Although consumer sale reduction is a rough problem for Apple to face, one of the biggest issues is its supply chain. Since almost all of Apple’s products and elements are sourced from China, the closure of factories and potentially hazardous working conditions as a result of the outbreak may hinder their ability to supply consumers.
Perhaps the biggest issue for Apple going forward will be its slated release of a $399 iPhone for March this year – which could have its availability date pushed back several months. In their update, Apple stated that “These iPhone supply shortages will temporarily affect revenues worldwide.”
Although all factories have since reopened, Apple has stated that they overestimated the speed at which products would be able to be output by the various facilities they operate around the country. The company also stated that its priority is the safety and wellbeing of all employees and partners that supply Apple with key materials for their products.
The Street’s Reaction
Futures for both the US and Japanese markets slipped immediately after the announcement. To make matters potentially worse, the closure of American markets due to President’s Day is giving Asian markets little information to play with – it’s unclear to what extent the S&P 500 will be impacted by the updated guidance from Apple. However, NASDAQ 100 futures have dropped 0.5% since the last trading session and may dip lower as Asian markets open slightly down, with the ASX losing 0.39% just after the opening bell.
Can Apple Weather The Storm?
One important thing to note with regard to Apple is that they’re not alone in this quite unique situation. The Coronavirus is hitting supply chains across the world and the reduced consumer demand for domestic products will hurt many brands – not just Apple.
The future of the company shouldn’t be questioned, however: as one of the largest traded entities in the world, Apple is still incredibly valuable as an investment and will likely continue its strong growth over the next decade. The biggest risks it faces are a much harsher Coronavirus death toll than expected and the ongoing trade war between the United States and China.
Still, sentiment regarding the company is unlikely to change by rating agencies on the updated revenue forecast, owing to the fact that almost all companies with a business presence in China would expect to see some damage to their bottom line.
Should You Buy Puts In Apple?
Investment advice is seldom valuable to receive online, but if you feel like gambling all of your money away, one play might be buying puts in Apple – the Reddit community known as Wall Street Bets seems eager to make this their dominating play for the coming trading session. The good news is that they’d only go ahead and spend their money on the best sex dating sites instead, so it’s not like the money would really be utilized for any life essentials. /r/WallStreetBets might be a little degenerate, but that doesn’t mean they’re going to blow all of their cash on options!
What Should Apple Do?
One potential option for the future of Apple and how it can better manage revenue streams going forward would be to potentially allow porn games on the App Store. Back in 2018, Apple made the decision to ban Tumblr’s app until it fixed issues surrounding access to adult material on the platform.
Questioned by some, it may be an idea for Apple’s team to consider relaxing its rules on mature content – especially in countries where access to adult materials isn’t illegal. This move ought to also be considered by Google – a company that has long since had a campaign against the adult industry and denies it as a source of revenue for the service.
The exact outcome of the Coronavirus on the world economy isn’t fully understood or able to be calculated just yet, but with companies losing revenue and supplies as the days go on, we could see a recession-like data coming from several companies all over the world in the coming weeks and months. Apple surely won’t be the last publically traded company to adjust their forecasts with the ongoing situation in China.