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What The Apple Suppliers and Verizon Are Saying About Apple’s Stock
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I’m so confused by the Apple iPhone back and forth now that I can’t figure out what who is right and who is wrong. Are iPhone sales strong, is Apple’s guidance for next quarter at risk? It seems like every day one analyst is defending Apple while another is raising concerns. Today’s was JP Morgan’s turn, cutting forecast for the Apple suppliers. The most significant problem here is that market is beginning to tell us that all is not so well for the iPhone, based on the stocks of the suppliers, and Verizon’s recent comments, and that is starting to make me concerned.
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Verizon
Apple’s stock has been relatively flat in 2018, but such is not the case if you are a supplier. Even Verizon recently noted on their conference call, they see and elongation of the upgrade cycle with customers not upgrading to new phones as quickly, as in the past. Admittedly, that is not a good sign for the iPhone.
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Supplier Struggle
Then looking at the supplier stocks and they just continue to behave terribly. Skyworks, Qorvo, Jabil, Cirrus Logic, Broadcom, have been crushed since mid-November. Unfortunately, we can’t use Qualcomm and NXP in this assessment given the buyout scenario for each.
The chart below shows how each stock of the suppliers is down by over 8 percent, while Apple shares are flat, and the S&P is up by nearly 9 percent.
So if we remove our emotions, and gut feelings it seems pretty clear from looking at stock performance, and the recent Verizon conference call notes that all is not going well for Apple and the newest iPhone launch and that perhaps this cycle may not be what everyone had expected.
Cheap Multiples
All of these suppliers also trade with one-year forward PE ratios of 12.5 or below, which appear cheap, but of course, that is if companies do not start talking down those expectations, then suddenly we can see those PE’s begin to rise, as estimates come down.
SWKS PE Ratio (Forward 1y) data by YCharts
The one thing I have learned over the years is that the market speaks, and stock price movements speak louder than any research notes, and when stocks are cheap based on a multiple or against a peer, there is a reason for it.
We will find out next week if the market was right or wrong. But for now, the market is speaking loud and clear. The newest iPhone will not be the runaway hit everyone expected it to be and that could be a problem for Apple’s stock.
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Michael Kramer and the clients of Mott Capital own shares of VZ, SWKS and NXPI
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
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Tags: #apple #suppliers #iphone #verizon
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.