Investors seem to think the iPhone-maker will be unaffected by the bloodbath in consumer spending. That’s wrong.
Apple (NASDAQ:AAPL) has long been a market darling, delivering huge gains for investors over its history. Shares of the iPhone-maker have marched higher over the last decade, driven by growth in its trademark smartphone, a highly profitable services business, and, more recently, an expanding wearables segment.
However, like most consumer-facing companies, Apple is facing a number of challenges from the coronavirus pandemic. Its stores outside of Greater China have been shuttered for more than a month, consumers are stuck at home, unable to shop anywhere but online, and manufacturing in China was temporarily suspended due to the outbreak.
The biggest risk for Apple right now may not be the pandemic itself, but the global recession that is just starting to sink in. In the U.S., 26 million Americans have filed for unemployment in the last five weeks, while Europe has been hit even harder by the virus in terms of caseload than the U.S. has.
Apple has actually outperfromed the S&P 500 since the coronavirus sell-off began, a sign investors believe the business will only be modestly impacted by the current headwinds as investors look forward to the anticipated rollout of 5G phones. However, that may be misguided. Though Apple is a tech company, it’s a consumer-focused one and is therefore sensitive to discretionary spending.
