Wondering why Apple fell into the 190s this morning? This will do for a start.
From a note to clients by Aaron Rakers than landed on my desktop this morning:
Apple shares are under pressure this morning (11/12) following a negative preannouncement by key supplier, Lumentum (LITE). Lumentum is a provider of 3D sensing solutions (VCSELs and edge emitting lasers) for mobile devices – most notably Apple’s iPhone. Lumentum has disclosed that Apple accounted for ~30% of total revenue in the company’s recent FY ending June 2018. We would also note that Lumentum’s 10-Q disclosures highlight that Customer A (presumably Apple) accounted for 30.5% of total revenue in the September quarter – compared to 19.4% and 16.3% of total revenue in the prior and year ago quarters, respectively. Customer A accounted for 49.8% of Lumentum’s December 2017 quarter revenue.
Lumentum’s preannouncement notes that the company has “…recently received a request from one of our largest Industrial and Consumer customers for laser diodes for 3D sensing to materially reduce shipments to them during our fiscal second quarter for previously placed orders that were originally scheduled for delivery during the quarter.” The company has updated its F2Q19 revenue guide from $405-$430M to $335-$355M – a 17%+_ reduction at the guide midpoint. We think investors could consider Lumentum’s updated guide as reflecting as much as a 30% cut in Apple orders. Lumentum is scheduled to present at an investor conference today (11/12) at 12pm PT. As a reminder, Lumentum had reported its F1Q19 results and provided a F2Q19 outlook on November 1st.
Maintains Market Perform rating and $210 price target.
My take: Could be a bad sign. Could be that Apple has many suppliers and plays them off against each other.
UPDATE: A friend of the blog dug up this press release from last December, when Apple invested a few hundred million in one of Lementum’s chief competitors: Apple awards Finisar $390 million from its Advanced Manufacturing Fund