Shanghai, the business capital of China, is slowly beginning to reopen following citywide lockdowns due to a spike in COVID cases. Businesses have restarted production and civilians are now allowed to move out of their apartment complexes with time restrictions.
An analyst, however, cautions the effects of the COVID resurgence will linger for a while longer.
There is some evidence of dented consumer confidence and worsening inflation, which point to destruction of consumer electronics demand, analyst Ming-Chi Kuo of TFI Securities said, citing his latest survey.
"In other words, demand is disappearing, not deferred," Kuo said.
This is as opposed to expectations that improved production after Shanghai's reopening will meet deferred consumer electronics demand, which in turn will benefit sales and profits of companies in the third quarter or the second-half of 2022, the analyst said.
Looking forward to the second half of the year, the analyst said currently there are no signs that negative consumer electronics demand will improve.
"It will leave brands and supply chain with lower-than-expected sales and profits for 3Q22/2H22, leading to further downside risks to the stock price," Kuo said.
The prominent Apple, Inc. AAPL and Tesla, Inc. TSLA analyst echoed a similar sentiment in early May, when he noted that the Ukraine-Russia war also as a reason for his negative outlook.
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