Coronavirus Is Not Only Eating Into Growth, But Might Also Break Some Bubbles

The Coronavirus is not stopping at infecting individuals--it's also affecting companies' earnings. Its influence can be seen in the stock markets around the world. And the predictions are quite severe: the virus could take down even more than $1 trillion off equity markets, depending on the gravity of the impact.

IT Companies

The companies that rely on supply chains which are affected by COVID-19 experienced some strong hits in this quarter. Their supply chains have been exposed in this scenario, and the latest interruptions affected their expectations to meet financial guidance for the quarter ending in March 31^st. This has resulted in a stock decline during the last five days. Apple Inc AAPL had to announce that is not expecting to meet its second-quarter guidance due to slower or paused production in China.

Many Apple products are produced in China, so the coronavirus outbreak affected the company's supply chain. Furthermore, 15% of Apple's revenues come from China, and the virus will affect that segment also. HP Inc. HPQ is facing similar problems. Production is slower, impacting all the manufacturing timelines. The company expects the negative impact, both on the level of revenues and the final result. After taking into consideration the virus outbreak, new anticipated earnings are 46-50 cents per share, while adjusted earning per share are 49-50 cents.

Retailers

Retail companies are also expecting the coronavirus outbreak will negatively reflect on their revenues and earnings. Ralph Lauren Corp RL is accounting for a decrease of up to $70 million in sales for 2020. Asia sales segment is expected to take more than 50% of that hit, about $35-45 million.

Nike Inc NKE is already looking at lower retails sales than expected, with more to come, since almost half of its factories in China are closed. New announcements and updates from the company are expected during its third-quarter earnings call.

Beauty Segments

The Estee Lauder Companies Inc. EL expects the biggest sales hit in the third quarter, which is generally expected to be the quarter with the strongest hit for the luxury beauty segment. Having in mind that strong customer demand is expected this year and that sales could outperform the industry, the outbreak will keep the company's sales in the second half of the year in a similar level as the same period last year, or up to 1% increase.

Earning per share is anticipated in a range $1.70 to $1.81, while adjusted earnings are expected in a range between $1.82 to $1.91 per share.

Tesla Inc

Tesla Inc TSLA stock had a good trend in 2019 and a great trend in 2020. Some analysts warn that their stock might be in a bubble. This week's constant decrease in its share price seems like that bubble is ready to burst. And it is all due to the concerns about the Coronavirus outbreak and its impact.

On Monday, Tesla's share price fell twice as hard as the Dow Jones and S&P 500 as the electric automaker is quite dependent on its Gigafactory in Shanghai and part suppliers in China. But there's also the aspect of sales, as the Chinese market was growing in Tesla's total sales, and this will also be affected this year due to the lockdown.

Conclusion

Once companies started accounting for and announcing lower expectations due the virus outbreak, it brought quite a level uncertainty among the investors- and no market is a fan of uncertainty. Although it is still early to assess the impact with accuracy, it is already beyond clear there will be one.

So, the more speculative the shares, the ones which were build-up, they are more likely to go down more than others. And this could even be the case for Tesla which has been on an extraordinary run so far. Then again, if one thing Elon Musk knows- is to prove everyone wrong!

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