A sudden increase outside China in the coronavirus outbreak affects almost every sector of the stock market. While investors are rushing to sell risky assets, it is important to know which companies are more vulnerable to the supply disruptions that this deadly disease causes for companies that purchase components or products in China.
At the top of this list are the gigantic retailers, manufacturers of industrial goods and some American technology companies that depend on Chinese imports and / or the enormous consumer market of the country for their products.
China represented one fifth of total US imports in 2018, according to the office of the US trade representative. Furniture, toys, sports items and plastics are among the top imported categories, according to the USTR.
Below is a short list of three US-based mega-files from different sectors that are likely to suffer more than others as this stock-up sells and snowballs to something bigger.
1. Amazon.com
The shares of the largest e-commerce retailer in the US, Amazon.com Inc. (NASDAQ 🙂 fell more than 5% on Monday, making it one of the hardest hit among the group of top tech companies. The biggest concern for Amazon investors is that retailers could run out of supplies if companies in China do not resume normal operations quickly.
The mega retailer is likely to experience this potential product disruption sooner than other retailers because of its & # 39; lean & # 39; inventory management system. In good times this system allows the internet company to work more efficiently, because it helps to free up more capital that would otherwise be absorbed in products that are waiting to be sold.
Weekly price chart of Amazon
"These are costs to pay for the efficiency that a just-in-time supply chain brings you," said Guru Hariharan, a former Amazon employee and founder of CommerceIQ, in a recent report in the New York Times .
The severity of the coronavirus threat to Amazon can be measured by the impact of disruptions on the company's vast network of external vendors who use its online marketplace to sell their products. These sellers rely mainly on China for goods such as baby toys, dog carrier bags and colored pencils. Such products account for around 60% of Amazon's sales.
After falling 4% yesterday, to $ 2009.29, Amazon is still more than 8% for the year and 23% for the past 12 months.
2. Apple
The iPhone maker, Apple Inc. (NASDAQ :), was the first of the top technology companies to warn investors that its sales will be affected by the spread of viruses and that it will not be able to reach the sales target set for the current quarter.
China is one of the largest markets in Cupertino, CA, with sales of nearly $ 52 billion in the most recent fiscal year. Apple said last week that the production of the iPhone – which generates most of the company's revenue – is temporarily limited due to virus-related problems. "Work is starting to resume across the country, but we are experiencing a slower return to normal conditions than we expected," the company said in a statement.
Apple planned to start producing a new, cheap iPhone in February and make it available for sale in March, Bloomberg News reported. It is unclear how the corona virus affected those plans.
"We think revenues have only been delayed versus lost and our FY20 estimates are unchanged – although we admit that this is a fluid situation and revenues can be pushed further into the December quarter," wrote Evercore ISI analyst Amit Daryanani in a note at the weekend when he lowered his sales estimate in March by about $ 8.6 billion.
Apple fell by around 5% yesterday, reaching $ 298.14, increasing the five-day loss to 7%. It fell by 4% in the same period.
3. Nike
Sportswear giant, Nike Inc (NYSE 🙂 is a another mega cap consumer stock that is particularly vulnerable because the corona virus continues to spread worldwide. Earlier this month, Nike said that about half of its stores in China have been closed due to the corona virus and he expects the outbreak to have a "material impact" on its operations in China.
Despite the company's consistent efforts to diversify its production outside of China, the country is still the most important production hub for Nike products: around 23% of Nike & # 39; s shoes and 27% of its clothing is manufactured in the virus affected country.
China is also Nike & # 39; s largest growing area in recent years. The company generated $ 6.2 billion in sales in the region last year, compared to $ 2.6 billion in 2014. The area's share of Nike's total sales almost doubled in the same period.
After a $ 105.62 peak in January, Nike has since fallen by around 9%. The shares fell 4.3% on Monday to close at $ 95.91.
