Investors weren't entirely in the holiday spirit coming back from the long Thanksgiving break, and Wall Street saw stock indexes fall after they posted solid gains last week. The Nasdaq Composite (^IXIC) opened down about 0.6% Monday morning when the trading session began.
Worries about the Chinese economy weighed on the overall market, but they were of particular concern to consumer electronics giant Apple (AAPL -2.63%) as it deals with potential problems that could disrupt supplies and hurt near-term financial results. However, the news was better for advertising-tech specialist Taboola (TBLA 43.48%), whose stock soared after making a deal with a well-known company with extensive digital property exposure.
Apple deals with challenges
Shares of Apple dropped about 2% early Monday, extending losses from Friday. The tech giant has been a focal point of problems in China linked to the zero-COVID policy there.
Apple and its Foxconn production partner have faced challenges at a key production facility in Zhengzhou, where COVID-related restrictions have led to protests among Chinese workers. In response, Foxconn has offered extensive bonuses in order to get the workers it needs to keep the facility running at reasonable capacity. Zhengzhou is the largest iPhone factory in the world, and Apple has relied on the facility for supplies of its newest iPhone 14 Pro and Pro Max lines of smartphones.
Even with those measures, though, Apple is likely to see production of iPhone Pro smartphones fall short of expectations by 6 million units, according to reports citing those familiar with operations. Moreover, if lockdowns continue in the area, there's the potential for even further shortfalls in iPhone production.
In the long run, Apple expects to be able to make up for any lost production in 2023. Yet with so much attention focused on the holiday shopping season, waiting until next year won't be an attractive option for many shoppers. Moreover, the difficult situation for Apple has broader implications across the industry, as it confirms that supply chain pressures remain persistent.
A big deal for Taboola
Elsewhere, shares of Taboola soared 66% early Monday morning. The provider of internet advertising services announced a valuable partnership that should boost its prospects in an increasingly competitive field.
Taboola and internet website giant Yahoo! have entered into a 30-year commercial agreement. Under the partnership, Taboola will be the exclusive provider powering native advertising across all of the digital properties that Yahoo! controls. Moreover, ad inventory will be available for interested purchasers using the Yahoo! demand-side advertising platform, which should make Taboola a leading native advertising offering for advertisers, publishers, and merchants using the internet.
In exchange for giving Taboola's business a big boost, Yahoo! will get just under a 25% equity interest in the advertising services company's stock. In addition, Yahoo! will have the right to name a member on the Taboola board of directors. Shareholders will have a chance to approve the deal on December 30, with expectations that the agreement will become effective during the first quarter of 2023.
Taboola and Yahoo! are hopeful that by working together, they can generate an extra $1 billion in annual revenue. That would be a nice boost for Yahoo!, but it would clearly have a much larger impact on the smaller Taboola. Monday's gains are a start in reversing a massive decline that took as much as 85% off Taboola's stock price since it went public through a special-purpose acquisition company in July 2021, but investors are hoping for an even bigger rebound in the months to come.
Dan Caplinger has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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November 28, 2022 at 10:32PM
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Apple Falls on China Fears, but This Nasdaq Stock Is Soaring Monday - The Motley Fool
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