Bloomberg: Foxconn, anticipating Apple car, disappoints investors

From Debby Wu’s “Foxconn’s Profit Misses Estimates as Pivot to Cars Accelerates” posted Tuesday:

Hon Hai Precision Industry Co. reported quarterly profit that disappointed investors as the Taiwanese electronics assembly giant accelerated a shift away from its core businesses into making electric vehicles.

The company also known as Foxconn Technology Group said net income for the quarter ended in December declined 3.7% to NT$46 billion ($1.6 billion), slightly below the NT$50.2 billion average of analyst estimates. While the company remains “cautiously optimistic” on the outlook for information and communications technology this year, it’s monitoring component shortages that are expected to persist in 2022, Chairman Young Liu said on a conference call.

“The impact of shortages in the first two months of the quarter have not been too obvious, because our customers are major companies,” Liu said. “Still we are seeing some gradual changes and are monitoring the situation cautiously. Our expectations are that there won’t be a big impact, under 10%.”

Earnings in the previous three months had been driven mainly by new smartphones from Apple Inc. — its largest customer — and as demand for home computing equipment remained elevated. But the Taiwanese assembler is casting around for new growth drivers a year into the pandemic and it’s identified electric vehicles as a key emerging industry, joining a rush of technology firms seeking a foothold in auto manufacturing ahead of Apple’s own smart vehicle efforts.

My take: The possibility that Apple might get into transportation may not be priced into Wall Street’s models, but you can bet Foxconn takes it seriously.

UPDATE: Bloomberg Intelligence’s take…

“Robust demand for high-end iPhone models and enduring work-from-home and remote-learning trends make consensus for 30% 1Q sales growth at Hon Hai appear conservative, we believe. Meanwhile, the delayed release of the iPhone 12 suggests monthly sales may remain in the double digits throughout 1H. The company reported surprisingly strong 84.8% sales growth in February, though vs. a low base in the prior year,” Bloomberg Intelligence analysts Charles Shum and Matthew Kanterman, said.

2 Comments

  1. Jerry Doyle said:
    “…. My take: The possibility that Apple might get into transportation may not be priced into Wall Street’s models, but you can bet Foxconn takes it seriously.”

    So correct PED! Apple stock price is way undervalued. Long term investors are going to reap great rewards in the longer term. It borders on the myopic for one to believe erroneously that Apple doesn’t intend to be a viable player in the EV transportation sector with an iCar. Foxconn knows the EV transportation sector cannot be neglected and little doubt in my mind that Apple will turn to the one reliable supplier it long has used and cultivated bonding working relationships with to manufacture the Apple Car. WS has not built any of this into the current Apple stock price.

    Lastly, all of us on this blog have been shouting loudly that strong demand for the iPhone 12 high end models and WFA & remote learning continues; and, that much of that trend still will continue as a new transition from the traditional method of working and learning going forward. Apple benefits from this transition. This also is not built into Apple’s current stock price. At some point WS will grasp all this and Apple stock price will move ahead robustly.

    4
    March 30, 2021
    • Alan Birnbaum said:
      After all these years, I won’t hold my breath. Still, it’s been an interesting ( and profitable ride since 1999 ) – pun intended !!

      0
      March 30, 2021

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