The death knell could be sounded for the rally in the stocks of Apple following rising worries about the company’s iPhone x sale figures following reporting of disappointing guidance from two of the key suppliers of the iPhone maker.
The company has already lost about $63.9 billion of shareholder value following a drop of 7.1 per cent in its shares in three trading days till Monday. The slide in share price started after weaker then market expectation for its guidance for profits for the rest of year was reported by Taiwan Semiconductor Manufacturing Corporation (TSMC).
Against the Wall Street estimates of $8.8 billion, the range of revenue forecast for the second quarter of $7.8 billion to $7.9 billion was given by TSMC which is the largest semiconductor manufacturer in the world and one of the most important suppliers of Apple. The weak forecast was blamed on “weak demand” in the mobile sector by the company.
“Heading into Apple’s much anticipated March (FY2Q18) quarter next week the Street has gone into ‘full panic mode’ as supply chain checks out of Asia indicate that June iPhone shipments are trending well below expectations,” GBH Insights analyst Daniel Ives wrote in a note to clients Tuesday.
A potential drop in the chip sector and the stock market is indicated by the TSMC’s poor guidance, believes one veteran industry analyst.
“TSM’s warning this A.M. likely puts the kibosh on the semiconductor (SOX) rally. SOX is a leading indicator for overall stock market and has been rock-solid (relative strength) past 2 yrs. Additionally it’s open season on AAPL, the highest valued stock, and its suppliers,” Fred Hickey, editor of High Tech Strategist, wrote in on social media Thursday.
Following this there was a significant lowering of forecast for iPhone by a top Wall Street firm. The forecast for iPhones for the June quarter was dropped from an estimate of 40 million to 34 million compared to an average estimate of almost 43 million by Morgan Stanley just a day after TSMC’s warning.
“We expect Apple to report an in-line March quarter, but are cautious into earnings on May 1 due to our belief that June quarter consensus estimates need to be revised lower,” analyst Katy Huberty wrote Friday. “Apple’s capital return announcement could amount to a ‘sell the news’ type of event, especially if forward estimates are revised materially downward.”
And on Monday, dramatically low June quarter guidance was given by another key supplier for Apple, Australia based AMS. The company announced that it was is expecting a drop of nearly 50 per cent in revenues in the second quarter compared to the first quarter with second quarter guidance in the range of $220 million to $250 million. AMS manufactures and supplies optical sensors that are used in the iPhone X.
“We are not able to discuss the specific customer, but we are seeing significantly lower business from a large smartphones program and that is having a strong impact on the consumer business and the company as a whole,” AMS’ head of investor relations, Moritz Gmeiner, said.
The weak guidance was blamed on low iPhone X demands in the globally by the Wall Street. And consequently, lower than expected June quarter results are also expected from other semiconductor suppliers, predicts J.P. Morgan.
“TSMC’s June quarter guidance and ams’s guidance are further evidence of decelerating Apple demand (with iPhone X demand being particularly weak),” wireless semiconductor analyst Bill Peterson wrote in a note to clients Tuesday. “As such, we believe consensus revenue/EPS estimates for the June quarter are too high, and we lower our estimates for wireless semiconductor companies under coverage.”
(Adapted from CNBC.com)