Apple shares have been through the wringer of late because of supply and demand issues, recently losing its spot in the $1 trillion valuation club as its stock has sunk amid the coronavirus market crash of the past month-plus. And the latest news from the tech giant could have a negative long-term impact on the company.
According to the Nikkei Asian Review, Apple Inc. (Nasdaq: AAPL) is exploring the possibility of delaying the launch of its first 5G iPhone as the COVID-19 pandemic continues to hammer global supply chains.
“The Cupertino, California-based tech giant has held internal discussions on the possibility of delaying the launch by months, three people familiar with the matter said, while supply chain sources say practical hurdles could push back the release, originally scheduled for September,” the report said.
That was the one saving grace for Apple amid its recent tumble.
Despite the news, Apple shares actually bounced up 2% following Thursday’s opening bell, though, just about everything is rising so far today.
Apple’s Fall From Grace
In the last half of February, shares of Apple started to drop as the spread of the virus stoked investor fears in the tech company’s supply chain,which is heavily reliant on China.
The drop was precipitated by Apple pulling its quarterly guidance for sales due to the outbreak.
Apple’s fall from grace got worse in the first half of March as all three major U.S. indexes fell into bear markets. The company’s share price tanked by nearly 31% since reaching a high on Feb. 12, 2020.
Potential iPhone Delay Could Hurt Profits
The spread of the coronavirus has severely hampered global travel, and because a majority of iPhones are manufactured in China, the ability for Apple’s employees to travel for engineering and product verification testing is limited.
Couple that with a slowdown in the rollout of 5G networks in the U.S. limiting the need for a 5G-compatible phones, and a delay is not entirely unexpected.
Wall Street analysts have also suggested a launch could be pushed back by a month or two for those very reasons.
“We believe that a one- to two-month delay in iPhone launch could indeed happen, but we do not believe that a one- to 2-quarter delay is very likely,” JPMorgan Chase & Co. (NYSE: JPM) analysts wrote in a note to investors on March 25. “Delay in U.S. 5G network buildout with the current lock-downs is possibly the main risk for a meaningful push-out in 5G launches.”
What It Means for Apple Shares
It appears news of the delay of that iPhone isn’t concerning Wall Street as much as it should. One of the big reasons for that is because a slight delay still puts the iPhone out before Christmas.
The fourth quarter is when Apple capitalizes on the release of new products. Since 2013, the company’s quarterly revenue has spiked in the fourth quarter and subsequent first quarter, primarily due to the release of a new iPhone before the holidays.
However, investors need to stay on top of this. If delays go beyond one or two months, it will spell trouble for Apple shares and its profits for 2020.