Apple supplier Foxconn halting operations amid a fresh COVID-19 outbreak in key manufacturing hub Shenzhen, China, could deal a financial blow to the iPhone seller.
“It’s concerning. The vast majority of production comes out of that factory. If this lasts longer than a week, it starts to become a concern. For now Apple could shift to other production factories across China, but it puts gasoline on the fire,” Wedbush tech analyst Dan Ives said on Yahoo Finance Live. “I would say if this lasts for another two to three weeks, that could probably crimp production overall for the quarter probably by 1% to 2%.
Ives rates Apple shares at an Outperform with a $200 price target.
Foxconn is one of Apple’s largest suppliers. The company has temporarily halted operations as the Chinese government looks to contain a new COVID-19 outbreak.
The lockdown of Shenzhen is reported to last a week. But uncertainty will likely persist on whether the shutdown extends further into April, putting at risk important shipments of an array of tech gear.
Apple shares fell about 2% on the news.
The shutdown comes as Apple looks to ramp up production of its cheaper new iPhone SE. Wall Street thinks the device could be a financial hit, provided enough supply could be secured.
“It doesn’t hurt it initially [the iPhone SE rollout], but if this goes to the end of March then supply will be an issue going into that first half of April,” said Ives, adding the SE could quickly sell 30 million units.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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Source: finance.yahoo.com