Apple unnerves investors with '$4 billion to $8 billion' guidance

Even mighty Apple isn’t immune to the ongoing effects of a global pandemic.

The tech behemoth warned on its Thursday evening earnings call it would see a hit in the “$4 billion to $8 billion range” during the current quarter after China locked down entire cities — including factories — to mitigate the spread of COVID-19 and ongoing silicon shortages.

Apple CEO Tim Cook sought to temper concerns from the Street.

“These constraints are primarily centered around the Shanghai Corridor and… on a positive front, almost all of the affected final assembly factories have now restarted,” Cook said on the call. “And so the range, the $4 billion to $8 billion range, reflects various ramps of getting back up and running. We’re also encouraged that the COVID case count that’s been reported in Shanghai has decreased over the last few days, and so there’s some reason for optimism there.”

People line up outside the new Apple flagship store on its opening day following an outbreak of the coronavirus disease (COVID-19) in Sanlitun in Beijing, China, July 17, 2020. REUTERS/Thomas Peter

The warning on costs masked an otherwise strong quarter for Apple amid demand for new high-powered Macs and fitness services.

Here is how Apple performed compared to Wall Street estimates for the quarter:

Revenue: $97.3 billion versus $93.98 billion expected
Adjusted EPS: $1.52 versus $1.42 expected
iPhone revenue: $50.57 billion versus $49.16 billion expected
Mac revenue: $10.44 billion versus $9.23 billion expected
iPad revenue: $7.65 billion versus $7.19 billion expected
Wearables revenue: $8.81 billion versus $8.98 billion expected
Services revenue: $19.82 billion versus $19.78 billion expected

Shares of Apple fell 2.5% in pre-market trading on Friday. The tech giant’s ticker page was the most active on Yahoo Finance, highlighting Apple’s surprise commentary on costs.

Despite the warning, most sell-side Apple analysts maintained their out-perform ratings on the stock.

“Shortages will continue to be a near-term headwind, but Apple’s execution and product roadmap will continue to be effective drivers of growth long-term,” Cowen analyst Krish Sankar said.

Yahoo Finance’s Dan Howley contributed to this story.

Brian Sozzi, a former Wall Street analyst, is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Source: https://finance.yahoo.com/news/apple-4-billion-to-8-billion-china-guidance-105503581.html