Apple Supplier Shares Slide as Raymond James Cuts Estimates
(Bloomberg) -- All component suppliers are likely to be hurt by Apple Inc.’s “significant miss,” and face “a cascade of downward revisions as this news is digested,” Raymond James’s Chris Caso wrote in a note. Caso reduced his models for Apple, Broadcom Inc., Qorvo Inc. and Skyworks Solutions Inc.
Skyworks shares are down as much as 7.9 percent in early Thursday trading; Broadcom’s fell as much as 5.8 percent, and Qorvo sank as much as 8.4 percent, while Apple tumbled the most since August 2015, down as much as 9.6 percent. Major iPhone suppliers had fallen in December, after Cirrus Logic Inc. joined companies that had recently cut their outlooks, underlining concerns about Apple’s demand prospects.
Other decliners include Cirrus Logic Inc., Lumentum Holdings Inc., IPG Photonics Corp, ON Semiconductor Corp., Amphenol Corp., Coherent Inc., Diodes Inc. and nLight, Inc.
Raymond James’s updated expectations for iPhone unit shipments flow through to all supplier models, Caso said, and he assumes Apple hasn’t yet made cuts to suppliers, as the firm waited to announce results publicly before supplier cuts last quarter. He didn’t assess the possibility Apple will choose to “end-of-life” one or more iPhone models -- as the company did with the iPhone X last year --which would trigger an even sharper production drop.
Caso reiterated his market perform rating for Apple stock, adding that “while the company’s capitulation will help to reset expectations, we nonetheless remain concerned about next year’s cycle, since our checks (and those of others) have failed to uncover substantially new features until the 5G iPhone in 2020.” Estimates for the 2019 iPhone cycle may need to shift to “to drive a bottom in the stock.”
Though Caso cut his December quarter iPhone shipment estimate to 65 million units, down from a prior 69.5 million estimate, he said “the hangover is likely to be worse in March as the company works through excess channel inventory.” That means a reduction in his “already-conservative” estimate to 42 million units from 49 million.
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