In the last month, the number of corona patients continues to rise to new highs, and with the beginning of the rise, riots began in the largest iPhone manufacturing plant in
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in the city of Zanganzu. Many workers at the factory feared that they would find themselves locked inside it for an unknown period of time and decided to leave and run away from the factory, even if it required them to walk tens of kilometers on foot.
In order to replace the workers who left, Foxconn, which owns the factory, began recruiting new workers. Foxconn promised the new workers a rewarding wage for their work but did not provide the goods and the situation, combined with the increase in corona cases and the tightening of the authorities, led the workers to break out in violent riots and severely damage the production of the factory and the supply of Apple’s iPhones – which was estimated to be damaged by about 30% last month .
What is the financial significance of the damage to production?
Analyst Harsh Comer of Piper Sandler claims that the damage will be very significant. “In terms of numbers, we estimate $8 billion hit in upcoming reportsKomer said. Komer lowered the company’s profit forecasts to 119 billion dollars from the previous forecast of 127.3 billion dollars. Recall that in the company’s latest reports it brought in about 90 billion dollars, meaning The damage in question would have reduced the total revenue by almost 10%, according to Komar’s estimates, it is a damage of over 7% to the revenue in the current quarter.
Other analysts believe that the damage will not be small at all. Wedbush’s Dan Ives said the easing of the situation in the city (where the factory is located) “is good news for what has been a nightmare show for Apple. The company’s iPhone production has been running at 20% to 30% of its capacity for the past month and we think the result will be an unprecedented shortage of iPhones around the world in the coming Christmas period.” The target price that the two analysts have for the company still shows a very nice upside – Comer gave the stock a target price of $195, Ives gave a target price of $200 per share, 35% above the current price.
The company has already slightly missed the results in the iPhone segment, which still continues to be its most dominant, and now it seems that the upcoming miss will be even more significant. We already wrote about it last week – The company was able to present good results in the last quarter mainly thanks to a significant increase in revenue from the sale of Mac computers – which yielded Apple 11.5 billion dollars, 25.4% above the corresponding quarter and well above analysts’ expectations for 9.36 billion dollars. GodA company announced after the release of the reports that it expects significantly lower demand for the current holiday quarter And it is difficult to see the company now meeting analysts’ expectations.
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The situation in China is indeed improving and so is the city where the Foxconn factory is located, but with the Chinese government the hand should always be on the pulse. If the administration suddenly decides to withdraw from the upcoming reliefs, and goes against the expectation of many analysts, it is likely that we will see larger riots and closures which will also damage the company’s production capabilities. In order to overcome the Chinese dependence, Apple has already begun to transfer part of the production of its products to India, but the situation is far from being as the company would like. The company’s stock fell after the reports about the situation in China by about 10% to a price of $135 per share, but since then, combined with sharp increases on the part of the rest of Wall Street, the stock now stands at a price of $148 and the company’s value is $2.36 trillion.
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