As of February 14, 2020, the CoronaVirus had claimed the lives of 1,382 individuals, with more than 64,000 known cases of the virus. That is a very high mortality rate for a virus, at 2.2%. Most of us think about getting over a cold or flu within a few days or weeks, so having a deadly virus like COVID-19 is alarming and causing an “abundance of caution” for a great many people around the world, particularly any company that has a factory or store in China. Many U.S. companies fall into that category – particularly in the technology industry.
There is a cruise ship quarantined in Japan, where sadly one person passed away. (There has also been a death in the Philippines.) Travel in certain areas of China has been severely restricted. On Feb. 12, 2020, Mobile World Congress 2020 Barcelona, the largest mobile communications trade show, was canceled. One of the world’s largest Chinese factories, FoxConn, has been dark since the news of the virus hit, and is still off-line. Apple headquarters and retail stores in China are closed, as are Tesla stores, though Tesla claims that their Gigafactory is back to work. Schools have been conducting classes online.
As Federal Reserve Board Chairman Jerome Powell told Congress on Feb. 7, 2020, “Possible spillovers from the effects of the coronavirus in China have presented a new risk to the outlook.” Before news of the virus, the economy was predicted to grow 2.0% in the U.S. in 2020 and 5.9% in China. Economists have warned that China could dip as low as 3.8%.
Although the multinational companies are scrubbing the Internet of news of their store and factory closures, it seems pretty clear that the factory closures will cause global supply chain disruptions and inventory backlogs and lackluster product sales in China in the first quarter of 2020. The only real questions are, “How much?” and “Which countries and companies will be impacted the most?”
Which Countries and Companies Will be Impacted the Most By COVID-19?
Many companies are trying to reduce the impact of the virus on their next earnings report by widening their forward projections. Qualcomm has a forward outlook on revenue of $4.9-$5.7 billion, with non-GAAP earnings per share of $0.80 to $0.95. That is an unprecedented $800 million window of revenue room to be right in. Apple did the same, projecting revenue of $63-$67 billion, with a $4 billion spread. If earnings hit the low end of the target range, then the headlines could be kind. A miss might create concern, at minimum, and alarm if the miss is, well, alarming.
The bottom line is that the coronavirus, and the important steps that have been taken to contain the outbreak’s spread, will slow down the world’s economy. Store closures, factory suspensions, travel restrictions and health concerns have put multinational manufacturing on hold, Chinese consumer spending on pause and global citizens on high alert. With any luck, the virus will be contained quickly, and the mortality rate will drop to zero. However, things play out, there will be a negative impact on the next earnings season in April, and on global growth in 2020.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
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Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.