Apple (NASDAQ:AAPL) said on Monday that it no longer expects to hit its revenue guidance for its second quarter of fiscal 2020, citing the impact that the coronavirus outbreak in China has had on its supply chain and on sales in the market.
While Apple shares initially pulled back as the coronavirus outbreak worsened, the stock has mostly recovered from that setback. Monday's news that Apple won't be able to meet its fiscal Q2 revenue guidance could spook some investors and cause shares to sell off again on Tuesday. But is selling on this news the right move?
Apple's revised outlook
When Apple released its fiscal first-quarter results in late January, it reported top- and bottom-line growth well above what analysts were expecting. Furthermore, the tech company's guidance for revenue in fiscal Q2 between $63 billion and $67 billion was ahead of a consensus analyst forecast for revenue of $62.45 billion.
But Apple's strong momentum in fiscal Q1 may not carry into fiscal Q2 after all. "[W]e do not expect to meet the revenue guidance we provided for the March quarter due to two main factors," the company said in a press release on Feb. 17. Those factors include temporarily constrained iPhone supply and negatively affected demand in China due to the closure of its stores in China and the closure of many of its partner stores.
Regarding its iPhone supply, Apple noted that while its manufacturing partner sites are outside Hubei province (where the virus was first identified in the city of Wuhan) and these facilities have all reopened, "they are ramping up more slowly than we had anticipated."
In addition, management said it is "gradually reopening" its retail stores in the market but is ensuring it does so "as steadily and safely as we can."
Following the tech company's blowout fiscal first-quarter results and management's strong guidance for fiscal Q2, analysts had lifted their outlook for fiscal Q2. Before Monday's announcement from Apple, the consensus analyst estimate for Apple's revenue during the period had risen to $65.2 billion.
A buying opportunity?
If shares do fall on Tuesday, this could be an opportunity for investors who can stomach volatility to consider buying some shares of the tech giant.
Apple asserted in its press release on Monday that the company is "fundamentally strong" and that "this disruption to our business is only temporary." Furthermore, management said, "Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations."
Of course, Apple admitted that this is an evolving situation and said it will provide an update on the coronavirus outbreak's impact on its business during its earnings call in April.