Shares of Apple (NASDAQ: AAPL) 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?
Image source: Getty Images.
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.
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.
10 stocks we like better than Apple
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Apple wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.