Apple Analyst Says Cupertino's Semiconductor Suppliers Caught At Center Of Coronavirus Outbreak

Apple Inc. AAPL shares ended Tuesday's session lower after the company cut its second-quarter guidance due to the negative impact of the COVID-19 virus outbreak.

Chinese iPhone production is reportedly back up and running, and Apple stores are once again open after both were closed in the wake of the new coronavirus.

On Tuesday, Bank of America analyst Vivek Arya said Apple suppliers are caught in the eye of the storm.

“This will have a ripple effect of increased uncertainty and guide-downs across the semiconductor supply chain since Apple’s warning suggests a weak demand environment in China which impacts other smartphone vendors (Samsung, Huawei, Oppo, Vivo, Xiaomi – some of whom have started their 5G production) and their respective supply chains also,” the analyst said.

Stocks Impacted

Arya said the coronavirus uncertainty will likely create volatility throughout the entire semiconductor group in the near-term, but companies with the most exposure to Apple will likely take the biggest hit. Arya specifically mentioned the following at-risk suppliers:

• Skyworks Solutions Inc SWKS, 51% Apple exposure.
• Qorvo Inc QRVO, 35% Apple exposure.
• Broadcom Inc AVGO, 20% Apple exposure.
• Cirrus Logic, Inc. CRUS, 80% Apple exposure.

There are at least four reasons for semiconductor investors not to sweat the outbreak, he said:

China has historically supported its economy with aggressive stimulus during times of weakness.

The timing of the outbreak is favorable given the 5G ramp will not start until the second half of the year.

Much of the coronavirus weakness is already priced into Apple suppliers.

Many of the stocks primarily exposed to cloud computing and artificial intelligence are relatively insulated from the Chinese market.

Benzinga’s Take

Few analysts and experts anticipate the outbreak will permanently impact the Chinese economy. Therefore, long-term investors looking for an attractive entry point into these semiconductor stocks may have been granted a blessing in disguise.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Q4 13F Roundup: How Buffett, Einhorn, Ackman And Others Adjusted Their Portfolios

BofA Upgrades Las Vegas Sands And Wynn, Says Coronavirus Cases 'Leveling Out'

Photo by Raimond Spekking via Wikimedia.