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Why Apple Shares Dropped Friday


What happened

Black Friday can be an important day for consumer products companies like Apple (NASDAQ: AAPL), but investors aren’t feeling good about its stock today. Apple shares were down 2% as of 12:45 p.m. ET on this holiday-shortened trading day.

So what

Investors are likely down on the stock because of a situation that’s somewhat out of Apple’s control. COVID-19 cases in China have soared to levels that are causing the government to institute a new wave of lockdowns. And one city that is being affected the most is Zhengzhou, which is home to the largest iPhone assembly plant in the world. That has investors worried more about supply than demand for Apple’s products during the important holiday season.

smartphone in user hands with

Image source: Getty Images.

Now what

Earlier this month Apple warned investors that iPhone 14 Pro and iPhone 14 Pro Max assembly would be impacted due to COVID-19 restrictions at the Zhengzhou facility, which is the primary producer of those high-end models. When Apple provided investors with that update in the first week of November, it said the plant was operating at a “significantly reduced capacity.”

With cases now surging to even higher levels, and new restrictions being implemented as a result, it’s fair to assume that the supply situation will be getting worse before it gets better for Apple. The good news for Apple shareholders is that the company said it was still experiencing strong demand for its iPhone 14 models.

How much shipments will be affected by the latest lockdowns remains to be seen. Another impact from lower shipments will be increasing wait times for potential customers. Eventually those sales may be lost, rather than just delayed. Investors will be looking toward Apple’s next quarterly update to see how the situation has evolved. For now, some are deciding to sell their shares ahead of that.

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Howard Smith has positions in Apple. 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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