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Dow Jones News: iPhone Trouble for Apple; Caterpillar Pulls Guidance

By Timothy Green - Mar 26, 2020 at 12:16PM

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Analysts see lower iPhone sales and a delayed 5G launch for Apple this year, and Caterpillar is starting to have supply chain issues.

The stock market was in rally mode on Thursday, with the Dow Jones Industrial Average (^DJI -0.42%) up 5% at 12:40 p.m. EDT. Stocks rebounded following the brutal sell-off over the past few weeks driven by the novel coronavirus pandemic and actions taken by governments to slow its spread.

In the United States, the number of cases and deaths from the virus continues to grow rapidly. The U.S. now has nearly 70,000 confirmed cases and over 1,000 confirmed deaths, according to data from Johns Hopkins University. It won't be long before the U.S. surpasses Italy and China in the number of confirmed cases.

A rising tide lifted most boats on Thursday. Apple (AAPL 1.89%) stock rose despite multiple analysts becoming a bit more pessimistic, and shares of Caterpillar (CAT -2.54%) were up even as the company pulled its fiscal 2020 guidance.

Apple target cut, and 5G iPhone could be delayed

Given the global impact of the novel coronavirus pandemic, both on supply chains and on consumer demand, 2020 is unlikely to be a good year for Apple's iPhone business.

The iPhone 11.

Image source: Apple.

Analysts at Bank of America slashed their price target on Apple stock for just that reason. BofA reduced its target on the stock by $20 to $300, citing lower iPhone demand stemming from the pandemic. BofA also cut its outlook for 2020 iPhone unit sales from 207 million to 175 million. Under a bear-case scenario, BofA sees lockdowns reducing unit sales by 13%.

While BofA is becoming more pessimistic on Apple, the bank continues to rate the stock a buy. Positives include Apple's rock-solid balance sheet and an eventual sales boost from 5G-enabled iPhones.

Speaking of 5G iPhones, Wedbush analyst Daniel Ives now sees a launch in September or October as very unlikely. Ives pegs the chances of a 5G launch during those months at just 10% to 15% due to continued supply chain issues and travel restrictions affecting engineers. Wedbush maintained its buy rating and its $335 price target despite the near-term issues.

Apple stock was up 3.3% by early afternoon despite these negative developments. Shares of the tech giant are now down about 22.5% from their 52-week high.

Caterpillar yanks its guidance

Shares of Caterpillar were up 3% Thursday, despite the heavy machinery company withdrawing its fiscal 2020 outlook due to the novel coronavirus pandemic. Caterpillar said the pandemic is starting to impact its supply chain, and that it's suspending operations at certain facilities.

In the United States, the majority of Caterpillar's operations are still running, and the company plans to continue operations around the world as permitted by local authorities. However, it may be forced to suspend production at additional facilities as the pandemic runs its course.

While it's uncertain how long the disruption from the pandemic will last, Caterpillar has plenty of cash to make it through to the other side. The company ended 2019 with $8.3 billion in cash, and said it had $10.5 billion available from global credit facilities.

Beyond the initial disruption from the pandemic, Caterpillar could see a prolonged period of lower demand if the inevitable global recession caused by the pandemic doesn't come to a quick end. The stock has been hit hard during this crisis, down 28% from its 52-week high. More losses are possible if the situation continues to deteriorate.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$141.56 (1.89%) $2.63
Caterpillar Inc. Stock Quote
Caterpillar Inc.
$173.76 (-2.54%) $-4.53
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$30,967.82 (-0.42%) $-129.44

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

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