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3 Stocks Being Hammered by the Fallout From Coronavirus

By Danny Vena - Feb 22, 2020 at 11:20AM

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As the outbreak continues to expand, several companies are exhibiting symptoms of financial worry.

The first case of novel coronavirus -- now officially designated as COVID-19 -- was reported late last year. In the short time since, it has become a worldwide epidemic, and the most recent infection numbers are concerning. According to the World Health Organization, more than 76,000 cases have been confirmed, claiming an estimated 2,250 lives. The outbreak, which was first detected in Wuhan, China, is on "the brink" of becoming a global pandemic, according to the National Institute of Allergy and Infectious Diseases. 

In a global economy, an outbreak of this magnitude will no doubt have a negative effect on a wide array of businesses, with fear about the eventual toll spreading faster than the disease itself. This leaves investors to wonder what big-name stocks will suffer the greatest effects from the ongoing outbreak.

With that in mind, let's take a look at three companies that are already sounding the alarm: Hasbro (HAS -2.40%), Apple, (AAPL -1.80%), and Disney (DIS -1.31%).

Young couple sitting on carpet playing board game.

Image source: Getty Images.

1. Hasbro: A disrupted supply chain

Hasbro stock was sent plummeting more than 7% on Friday, after the toymaker announced that the outbreak of coronavirus continues to disrupt its supply chain in China, limiting the output of products for sale worldwide. The company is experiencing office closures, as well as third-party factory closures. 

This follows similar warnings Hasbro issued during its fourth-quarter conference call. At the time, CFO Deborah Thomas said, "There is disruption to our supply chain and commercial operations in China as travel is limited, and employees and factory workers have been delayed in returning to work." She went on to say that while the "impact to our business to date is small ... If it takes significant period of time to control, there could be a larger impact on our business."

The first quarter is typically a slower time for Hasbro, so the effect thus far has been minimal, but Hasbro gets more than two-thirds of its global toy supply from China, and more than 85% of toys sold in the U.S. are imported from the Middle Kingdom. 

Several different color iPhone 11 models fanned out, being splashed with water.

Image source: Apple.

2. Apple: Product supply "temporarily constrained"

The iPhone maker had already warned that its business in China could be hit by the outbreak. Earlier this week, the company updated its view, saying, "We do not expect to meet the revenue guidance we provided for the March quarter." The company cited two factors -- both related to the coronavirus outbreak -- as continuing to have a negative effect on its business. 

Apple said that worldwide iPhone supply would be "temporarily constrained." The manufacturing facilities that produce the iPhone are located outside the provinces that have been affected worst, and while they've been reopened, production is ramping up more slowly than Apple previously anticipated. The company has also seen demand for its products plummet in China, as Apple was forced to close all its retail stores in the country, and many other retailers that sell its devices were shuttered as well.

Many residents of the Middle Kingdom travel to visit family during the Chinese Lunar New Year holidays and had left or were already at their destination when the quarantines were put in place -- meaning many are still unable to return home or to their jobs. 

A lion cub being held up for all to see.

The Lion King was a hit in China. Image source: Disney.

3. Disney: Theme parks closed, films delayed

The House of Mouse is a global multi-media powerhouse, but it hasn't been immune to the effects of the coronavirus. The company announced in late January that it was closing the two theme parks most affected by the outbreak: Hong Kong and Shanghai Disneyland Parks.

During Disney's fiscal 2020 first-quarter conference call earlier this month, CFO Christine McCarthy said shuttering the locations would "negatively impact second quarter and full-year results," as the parks "typically see strong attendance and occupancy levels due to the timing of the Chinese New Year holiday." Disney is taking a charge to operating income to the tune of $135 million for Shanghai Disney and $40 million for Hong Kong Disney, and currently estimates that the parks will remain closed for at least two months. If the closures persist, the effect could be worse.

The company's movie studios could also take a hit. Mulan, the live-action remake of its hit animated film, is scheduled to be released late next month. The movie, which follows the story of a female Chinese warrior, had attracted massive attention in China, which boasts the second-largest movie audience worldwide, behind just the U.S.

Unfortunately, the film has been unable to secure a release date in China. Recent remakes, including The Lion King and Aladdin, have been hits in China, with box office takes of $122 million and $55 million, respectively, but the cultural relevance of Mulan would likely have proven to be much more popular with Chinese audiences. Now its future is uncertain. 

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$136.72 (-1.80%) $-2.51
The Walt Disney Company Stock Quote
The Walt Disney Company
$94.40 (-1.31%) $-1.25
Hasbro, Inc. Stock Quote
Hasbro, Inc.
$81.88 (-2.40%) $-2.01

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