Investor update on quarterly guidance
apple.com
apple.com
If COVID-19 spreads further throughout SE Asia unchecked, expect the SP500 to catch up with reality in a hurry.
AAPL is the first “big” company to report an impact. Check out /NQ and /ES in 16 minutes if you want to find out, I’d wager NQ will gap down .5% and ES will gap down .25% in the ETH session tonight. As to where they go from there, I’m betting on 3400 (with actual money)
Another rate cut or two is likely this year as well, that will juice things even more.
That said, the coronavirus has also been ignored as a whole until now. AAPL's downward guidance is a big, big fucking deal and is almost certain to cause a short term impact on prices. However, it'll also be transitory much as the rest of the shit is.
Near as I can tell, most of the vaccine development (outside of China) is being funded by charities right now. Drug companies were burned by Ebola investments and are not interesting in working on COVID-19. But if Apple thought they could speed up recovery by even a short time with careful investment here they'd more than make their money back.
>"One would think that the industry has the reserves to jump at this challenge. But none of the four top vaccine companies has shown significant interest," says Dr Ellen 't Hoen, director at medicines law and policy at University Medical Center Groningen in Amsterdam.
>Also speaking at last week's Aspen Institute event, Dr Anthony Fauci, director of the US National Institute of Allergy and Infectious Diseases, said no major pharmaceutical company has come forward to say it would manufacture a vaccine for Covid-19. He called it "very difficult and very frustrating".
>"Companies that have the skill to be able to do it are not going to just sit around and have a warm facility, ready to go for when you need it," Dr Fauci said.
>For Covid-19, charitable donations are being used to spark pharma companies into action to find a vaccine. https://www.bbc.com/news/business-51454859
I would say they already do by building the best laptops, tablets and smartphones in the world, increasing the productivity of the biomedical researchers who use their products.
In addition, their investments in Apple Watch and Apple Health long term I think are the future of healthcare. In 30 years I'd expect everyone will have the equivalent of their own doctor's office/diagnostic lab in their home. There won't be counterproductive mass-runs on hospitals because most things will be diagnosed at home. I think you can draw a pretty direct line from where Apple Watch is today to that future.
> Drug companies were burned by Ebola investments are not interesting in working on COVID-19.
I'd guess there are hundreds of companies working on COVID-19 vaccines. Here's an interesting one that was sent to me last week: https://news.ycombinator.com/item?id=22313320
Yes, the BBC articles mentions they are mostly smaller companies funded by things like the Bill and Melinda Gates Foundation. This feels like a coordination problem given the size of the economic damage from stuff like this.
Ideally it would be governments picking up the slack, but if we are so inefficiently allocating money to vaccines that have such big impacts on Apple's supply lines, there's a business case for them hedging with investments of their own.
I strongly suspect that large company logistics team, and certainly an expert like Tim Cook, already have this contingency in place. However, since CV has extended beyond the New Years time frame, those contingency plans will start to break down.
If the US ever decides to invade China, or if Taiwan decides to declare independence, it would probably happen within this window.
https://www.reuters.com/article/us-apple-iphone/coronavirus-...
...is this actually expected to affect Apple once the year is over? Presumably people will just wait a couple months to buy a new phone, and below-average sales now will be matched by a wave of above-average sales afterwards?
The need to upgrade your phone doesn't go away. And wouldn't all cell phone manufacturers be similarly hit these days? So it's not like switching brands away from Apple is more of an option?
Just curious... happy for someone to correct me if I'm making wrong assumptions here.
The market is closed today (Presidents Day). We won't find out the effect until tomorrow.
POs have already extended out significantly (some of our parts have more than doubled). Those estimates are at best guesses, I would be surprised if they don’t continue to slip.
Manufacturing supply chains are at incredibly low levels.
The second reason (slow sales in China) would really only affect things that are there, obviously.
I am sorry to bring up political aspects, but I hope it only portrays the objective state of the situation without any prejudicial color.
For example, Hiome builds its products in Chicago, but we get the PCB boards printed in China and are scrambling to adjust now that our boards are indefinitely delayed.
I’m curious to see what the eventual ripple effects are to the industry from this hiatus.
I know folks who sent teams out to clear out certain devices at retail to have a stockpile for replacements or new hires as a contingency.
The McKinsey consultants of the world have pushed for more and more "turns" (how many times your inventory turns over completely in a warehouse - most orgs aim for 3+ turns a year) and minimizing your "cash to cash" cycle (you pay for manufactured inventory, you need too turn it BACK to cash QUICKLY - don't have it sitting on warehouse shelves)
Now we don't have enough slack in the supply chain. Doesn't really matter much (except economically) for iPhones etc - but means a lot when you're running JIT (just-in-time) inventory management for things like hand sanitizer or medical masks.
I believe there was a similar reason for the auto industry to come back so strongly after the 2008 financial crisis. All those people who held off on car purchases in hard times exited the crisis with aging vehicles that needed to be replaced.
I would think that this sort of shortage would harm a consumables company like Coca-Cola a lot more than an “appliance” company like Apple, Toyota, or Whirlpool.
For your example in the auto industry, one large reason the industry bounced back was because of the Cash for Clunkers program. The US government spent $3 billion to make sure the auto industry would "come back strongly."
Without similar stimulus here, I don't see how the bottom line of Apple and other companies will escape being affected.
Consumers in China who wanted a new iPhone would probably rather stay at home than go out to buy a discretionary consumer device like an iPhone. Many will have less income with which to get by, meaning they wouldn't be able to afford an iPhone even if they were willing to go buy one. And with Apple stores closed in China, it's kind of tough to buy an iPhone there.
Meanwhile, people who really need a smartphone elsewhere will take this opportunity to buy a different phone.
Economic shocks have long-lasting aftereffects. Don't assume that the result of this hit to iPhone production is simply a phase shift of Apple's product cycle and consumer demand. For example, Apple will probably take cash away from its next stock buyback in order to cover the upfront costs of this hit to its revenue. And they may not be able to provide the kind of pricing and incentives that they were planning to provide before the virus hit.
The problem is that the old system created a positive externality (coincidentally storing a bit of inventory for emergencies, though inefficiently and in no way planned) that the new one doesn't. It's the sort of thing that should be fixed by government incentives.
So you can have JIT implemented in a slow turnover industry - imagine ferrari having a JIT assembly line that gives you your vehicle in less than a day after you place your order - but it doesn't make economic sense.
That said, introducing slack into the industry is not useful. What you need is increase in inventory stockpiling. And as any good financial analyst would tell you, an increasing stockpile number either implies a big future order coming through or that your product isn't selling. With consumer staples companies (the GICS sector term for companies that manufacture fmcg products like toothpaste and hand sanitisers), there is hardly a new market opening or some giant ass retailer coming out of nowhere to place large orders. So stockpiling almost certainly means slowing sales.