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Apple China Store Closures Pose 'Containable' Risk, Analyst Says

Apple likely won't lose significant sales from its decision to temporarily close all of its 42 stores in China due to the coronavirus outbreak, says Wedbush's Dan Ives.

Apple  (AAPL) - Get Apple Inc. Report said on Saturday it is temporarily closing all 42 of its China retail stores out of an "abundance of caution" in the wake of the coronavirus outbreak. But the financial damage is likely to be minimal to nonexistent, one analyst says. 

The stock was falling 1.33% to $305.40 a share in pre-market trading on Monday. 

Wedbush Securities analyst Dan Ives wrote in a note over the weekend that he sees at most one million iPhones at risk of being sold in the June quarter rather than the March quarter as a result of the store closures. That's just 3% of expected Chinese iPhone annual unit sales and is "a very containable risk," said Ives, noting that Apple's online store in China remains open and that much of the recent buying of iPhones and AirPods in China has already taken place in the lead-up to Chinese New Year, which began on Jan. 25. 

"With the vast majority of sales online we view a one-week closure of Apple stores as having a negligible impact thus far despite the scary and concerning headlines from the region," Ives wrote. "We do not view the impact of this virus epidemic as changing the numbers/merits behind the renaissance of growth in China for fiscal year 2020 and fiscal year 2021 with a 5G super cycle the longer term driver."

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In Apple's December quarter earnings report released on Jan. 29, which included strong iPhone 11 sales and healthy performance in China, executives gave a wider than usual range of revenue guidance for the current quarter owing to uncertainty around the impact of the coronavirus outbreak. The impact of the outbreak on Apple's supply chain in China, where most of its iPhones and many other products are made, could well prove more significant than that of temporary store closures in the country. 

Following Apple's initial pop after its recent earnings release, the stock is down about 5%, as the broader market has sold off on coronavirus fears, with companies with revenue exposure and operations in China getting hit the hardest. 

Apple shares are still up 2.4% to start 2020, outpacing the S&P 500's gain of 0.41%. 

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