Apple Stock Price May Drop Below $300 On Chinese Factory Halts

Apple Stock Price May Drop Below $300 On Chinese Factory Halts

  • Foxconn, a major smartphone maker, closes its production facilities in Eastern China
  • Analysts warn of strong impact if the production is delayed further for a week or more
  • Stock to correct below $300 on any additional negative developments from China

Apple stock price may correct below $300 after a top analyst cut iPhone shipment forecasts for the Q1 2020 by 10%. The stock gapped nearly 2% lower in today’s trading session, before it quickly erased gains to trade in green. 

Fundamental analysis: Coronavirus outbreak creates further issues for Apple

After it was forced to temporarily close 42 shops in China due to the coronavirus outbreak, Apple may face further difficulties with iPhone shipments. According to Reuters, Foxconn, which makes smartphones for Apple, has been forced to close almost all of its production facilities in China. 

Companies have been told to shut down their facilities until February 10. It seems now that a possible extension to the stoppage for another week could create further issues for companies that depend on shipments of their products from China. 

“What we are worried about is delays for another week or even another month. The impact would be big. It definitely will have an impact on the Apple production line,” a source told Reuters

Foxconn has a major production facility in Suzhou, a city in Eastern China. The company seems confident it can overcome the gap in production as it has production facilities in other countries as well, namely Vietnam, India and Mexico. 

Still, analysts seem more concerned with the production output from Foxconn. Top Apple analyst Ming-Chi Kuo said that his TF international Securities has cut iPhone shipment forecasts for the first quarter of 2020 by 10%.

″Our latest survey indicates that the iPhone supply is being affected by the coronavirus and, therefore, we cut the iPhone shipment forecasts by 10% to 36-40 mn units in 1Q20,” Kuo said.

“It’s difficult to predict the shipments in 2Q2020 because of the uncertainties of the coronavirus epidemic and consumer confidence,” he added. 

Although Apple didn’t disclose the exact shipment numbers for iPhone, Kuo believes that the tech giant shipped around 38 million in Q1 last year. 

Technical analysis: Apple stock on a roller coaster ride

Apple stock price gapped almost 2% lower on the news that the company may receive fewer iPhone units from Foxconn in Q1. Shares of the tech giant currently trade 0.77% positively on the day as the bulls used the opportunity presented today to buy the dip.

As seen in the chart below, the stock has attracted strong buying interest around the $305 mark. However, the bears have increased the pressure again to reject an attempt from the bulls to return the price action above $315.

Apple stock daily chart (TradingView)

On the downside, there are layers of horizontal support at $300 and $294, which should provide additional cover for the bulls. On the upside, the all-time high of $327.84 remains a major target for the bulls in the near-term. 

Summary

Foxconn, a smartphone maker for Apple, has been forced to shut its production facilities in Eastern China amid fears of further coronavirus outbreak. Apple stock price corrected lower to open the New York trading session, but has however, managed to recover a portion of the losses. An extension to the stoppage for production hubs may force the stock to correct further lower below $300.

By Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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