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Why Apple Stock Fell Today

What happened

Shares of Apple (AAPL -2.12%) declined by 2.1% on Tuesday after TF International Securities analyst Ming-Chi Kuo warned that the tech giant’s smartphone shipments could come in far below investors’ expectations. 

So what

With COVID-19 cases surging in China, health officials are attempting to contain outbreaks by instituting strict lockdown measures. This has sparked a wave of protests against the Chinese government’s zero-COVID policy. 

The worrisome combination of soaring coronavirus infections, stifling lockdowns, and intensifying civil unrest is weighing heavily on China’s economy. It’s also taking a heavy toll on Apple’s ability to manufacture its products in the country.

Kuo estimates that Apple will ship 15 million to 20 million fewer iPhone 14 Pro and 14 Pro Max phones in the quarter ending in December, due in part to protests at the iPhone factory in Zhengzhou. In turn, the analyst slashed the total iPhone shipment forecast by 20% to between 70 million and 75 million units. Kuo noted that this new projection is significantly below the average analyst estimate for iPhone shipments of 80 million to 85 million.

Now what 

Considering this expected shortfall in sales of these higher-priced iPhone models, Kuo warned that Apple’s revenue could come in more than 30% below investors’ expectations in the holiday quarter. Worse still, Kuo cautioned that a significant portion of these missed iPhone sales could be lost, rather than simply delayed, as more consumers opt for less expensive phones instead of waiting for the Pro models to come back in stock.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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