Foxconn Technology stock is down approximately 16.35 percent, 5.39 percent, and 3.91 percent in the past year, YTD and three months respectively
Following an earlier announcement by Foxconn Technology Co (TPE: 2354) that it has halted operations in Shenzhen, analysts are now confident the Apple Inc (NASDAQ: AAPL) largest chip and component supplier could turn around the challenge so long as they do not drag long. Moreover, media outlet Reuters reported that the company had restarted some production and operations at its Shenzhen site. The move was after meeting government conditions that require employees to live and work in a bubble.
After closing Tuesday trading at $155.09, up 2.97 percent from the day’s opening price, AAPL shares are now up 2.06 percent during Wednesday’s premarket.
Foxconn amid Global Chip Shortage
In addition to the ongoing global chip shortage, Foxconn is now affected by the imposed lockdowns in China, following the Covid-19 resurgence.
As a result of the Covid resurgence and ongoing geopolitical uncertainty, the company’s leadership forecast a very challenging year.
“The pandemic has not eased, inflation is high and global politics are getting tense – these all further complicate supply and demand and lead to great uncertainty to our outlook,” Foxconn Chairman Liu Young-way noted.
Nevertheless, with the company’s diversified production sites and the long-time relationship with Apple, analysts are confident a plan may be hatched to start production in other parts of the world.
“Apple/Foxconn can relocate production to other areas in the short term provided that there is not a significantly higher duration of lockdown,” wrote Bank of America analyst Wamsi Mohan. “An increased period of shutdowns can cause ripple effects at other components that can create a shortfall in production.”
“With the March quarter typically being a lower seasonal quarter, we believe any impact on production from the Shenzhen facility could be transferred to other sites, leaving limited impact,” said Piper Sandler’s Harsh Kumar.
Foxconn Stock and the Market Outlook
According to market data provided by MarketWatch, Foxconn Technology stock is down approximately 16.35 percent, 5.39 percent, and 3.91 percent in the past year, YTD and three months respectively through Tuesday.
Currently, Foxconn’s success reciprocates Apple’s success and vice versa. Of note, AAPL stock has gained approximately 12.66 percent in the past year but has since dropped approximately 12.66 percent and 13.50 percent YTD and the last three months respectively.
With the cited correlation, investors should be keen on the latter’s device demand and the former’s ability to deliver timely.
Currently, it is estimated that the Zhengzhou production site can manufacture approximately 50 million iPhones per quarter.
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