Foxconn stock price drops as profit plunges by 90%

Foxconn stock price drops as profit plunges by 90%

  • Foxconn reports a nearly 90% crash in its first-quarter profit
  • Revenue dropped 12% mainly due to a sales decrease by 7.7% in March
  • Stock price closed 1.2% lower on the day, threatening to end the rebound and head south

Shares of Foxconn (OTCMKTS: FXCOF) closed the day 1.2% in red after the tech firm said its first-quarter profit crashed nearly 90% amid the COVID-19 outbreak.

Fundamental analysis: Stabilization expected in the second quarter

The Taiwanese technology giant Foxconn said it earned T$2.1 billion ($70.25 million) in the first quarter, coming nowhere near the T$8.88 billion forecasted from the analysts. Apple’s main supplier reported a profit of T$19.83 billion a year ago, a nearly 90% increase compared to this year’s results.

“Things were not normal in February and early March,” Liu Young-way, chairman, said on a call with investors.

Revenue dropped 12% to T$929.13 billion, the company also known as Hon Hai Precision Industry Co., said in a regulatory filing to the Taiwan Stock Exchange. The company expected to stabilize in the second-quarter, with the double-digit revenue growth expected.

“Hon Hai will stabilize in the second quarter,” Foxconn added in a statement. 

The first-quarter results aren’t surprising given that the company was forced to halt production at multiple of its facilities in China due to the COVID-19 outbreak. Foxconn remains cautious as to what to expect in the second half of the year. 

“In early March, our outlook was guided by the supply problems. Since late March, we have seen a huge demand shock and visibility for the second half of the year remains very poor,” said Liu.

Invezz reported last month that Foxconn registered a 7.7% drop in sales in March, which resulted in the company issuing a preliminary warning that its revenue is expected to drop 12%, which was then confirmed today.

Technical analysis: Stock price attempts to break lower

Shares of Foxconn, which have lost 15% for the year to date, closed 1.2% lower today following the earnings results, totalling weekly losses to 2.5%. Looking at the weekly chart, the price action looks like it wants to reverse its bullish trend as the buyers are struggling to extend the uptrend higher. 

Foxconn stock weekly chart (TradingView)

What is even more worrying for the buyers is the fact that the price action is creating a bearish pennant chart pattern. This is a continuation pattern that aims to extend the downtrend lower. For it to be activated, the price must dip and close below 54.0, with the target measured near the all-time lows at 34.0

Summary

Shares of Foxconn closed 1.2% down on the day after the Taiwan-based company reported a massive profit plunge of nearly 90%. Foxconn, which is the main supplier for Apple, said that it expects to record double-digit growth in revenue for the second quarter. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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