Three Reasons Apple’s Shares Took A Drubbing – Forbes

There was a general sell-off of tech stocks on Friday but Apple was hit harder than most of them. Its shares fell $6 or 4.9% while the NASDAQ fell 1.8%. It also fell more than any of the four FANG (Facebook, Amazon, Netflix, Google/Alphabet) stocks. Being the largest market cap stock is one reason since it means the stock has very good liquidity. If portfolio managers want or need to raise a lot of cash it typically won’t move the stock price very much if they need to sell a large position.

Opening day for Apple’s store in Singapore. Photo credit:ROSLAN RAHMAN/AFP/Getty Images

New iPhones could be at a disadvantage

Maybe the “biggest” reason for the stock’s selloff was a Bloomberg article that Apple would be using Qualcomm and Intel modems in the upcoming iPhone 8 but that Intel’s modem speeds won’t match Qualcomm’s. So that all iPhones perform the same Apple would slow down the Qualcomm iPhones but that will put the new iPhones at a disadvantage versus the competition.

Besides wanting to have two suppliers Apple is having a contentious relationship with Qualcomm as it is suing Qualcomm over royalty payments. This is another reason that Apple would want to have a second supplier but could force Apple to ship an inferior product. Apple has sold lower function products before without impacting its market share to a large degree but if there is a major difference in download speeds this is definitely not a positive.

Bullish analyst had some weak numbers

Brian White, who is a major bull on the shares, tracks monthly sales of Apple suppliers to try and gauge the outlook for Apple. He published a note on Friday that while the suppliers May results were better than historical averages if the June numbers are in-line with history that the June quarter would show a 3% quarter to quarter decline vs. an average increase of 12% for the past 12 years.

Tracking Apple’s supplier results don’t match up to Apple’s results exactly with one reason being the lag time between when the parts are sold by the suppliers to when the final product is sold by Apple. So if White’s numbers are accurate (or not off by much) what it portends is a weaker outlook for Apple’s September quarter, not June quarter results.

Currently the sell-side analysts are expecting September quarter revenue of $50.52 billion which would be an increase of 13.8% when compared to the mid-point of Apple’s $44.5 billion in revenue guidance. This would even be stronger than when the larger screen iPhone 6 and 6 Plus became available in September 2014 and would be the largest increase since the iPhone 4 was launched in 2010.

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