Please ensure Javascript is enabled for purposes of website accessibility

Why Apple's Stock Fell 11.7% in February

By Royston Yang - Mar 2, 2020 at 11:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

And why the downturn should be only temporary.

What happened

Shares of Apple (AAPL 1.62%) fell 11.7% in February, according to data from S&P Global Market Intelligence.

The manufacturer of the iconic iPhone and Apple Watch had, in its recent first-quarter fiscal year 2020 earnings report, announced record-breaking revenue and earnings from the iPhone, wearables, and services.

Yet shares in Apple have sold off hard since the middle of last month. Does this decline still make Apple an attractive growth stock?

A smiling woman seated at a desk looks at her smartphone.

Image source: Getty Images.

So what

The death toll from the COVID-19 virus has hit 2,943 as of this writing in China alone, and the U.S. has begun to see more coronavirus cases springing up.  Apple announced on Feb. 1 that it would shut all its stores and corporate offices in mainland China until Feb. 9, to comply with a government directive issued to stop the rapid spread of the virus. Though the company stressed that this was a temporary move, investors were aware that Apple remains heavily reliant on China for both its smartphone sales and its supply chain and manufacturing.

On Feb. 17, Apple issued an update to announce that it didn't expect to meet its Jan. 28 quarterly revenue guidance. The company said worldwide iPhone supply would be constrained as iPhone manufacturing sites in China were ramping up more slowly than anticipated, since workers were only just beginning to return to their cities following massive quarantines. It also noted a downturn in demand for Apple products in China, as store closures had been extended in some locations and operating hours reduced in others, while human traffic remained sparse.

Now what

Apple is a victim of the chaos that COVID-19 has wrought on global supply chains. As Apple produces most of its components in Chinese factories, it was inevitable that the company would take a bad hit from quarantine-related production downturns. Store closures in China further exacerbated the problem.

But even though Apple expects to miss revenue guidance, investors need to remember that these disruptions are temporary. Once the virus is contained, normal production and operating hours should resume. It could, however, be a painful few months before things return to normalcy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$138.93 (1.62%) $2.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.