Cirrus woes push Apple shares below $400
Latest factor putting pressure on Apple's stock price is an inventory glut at its iPhone audio chip supplier
Published: 18 April, 2013
Apple's share price is very far from achieving the $1,000 that more bullish analysts were predicting not so long ago. After a peak around $700 last September, it has now fallen below $400 for the first time in over a year, amid fears about its ability to maintain growth and market share for its biggest product, the iPhone.
The most recent drop has been triggered by various reports of slowdown among key iPhone component suppliers, and specifically this week, by news that audio chip vendor Cirrus Logic has an inventory glut which may relate to lower than expected iPhone sales.
Apple's shares declined by 5.5% to $402.80 at the close in New York on Wednesday, and had earlier touched $398.11. Cirrus, which makes sound components for the iPhone and iPad, is an indicator of demand for Apple's products, Peter Misek, an analyst at Jefferies & Co, said in a client note reported by Bloomberg. Another analyst, Vernon Essi of Needham, wrote: "We blame Apple for losing its mobility mojo. This was simply an inventory overbuild for the iPhone 5 relative to Apple's forecast."
Apple's stock has fallen by 43% since its peak in September amid multifaceted investor concerns that its mobile heyday is over, and that profits and growth will fall amid rising competition, especially from Samsung, and a lack of creative thinking in new product launches. The iPhone 4S and iPhone 5 were both considered step upgrades rather than radical new offerings, disappointing some users and commentators.
Many analysts lowered their targets for Apple when the firm reported its slowest profit growth since 2003, in its fiscal first quarter earnings report on January 23. For fiscal Q2, ended on March, Wall Street is braced for a fall in net income of around 18%, to $9.5bn, which would be the first year-on-year decrease since 2003. Apple will report its figures next week on April 23.
Cirrus has reported preliminary fiscal first quarter net revenue of as much as $170m, less than analysts' consensus forecast of $197.3 m. The company relies on Apple for most of its revenue but will record a net inventory reserve of $23.3m for the fiscal fourth quarter, which ended in March. The supplier said $20.7m of that figure related to a "high volume product from one customer", presumed to be Apple, which accounts for over 90% of total revenue at Cirrus, according to Bloomberg estimates. The shortfall may relate to lower than expected sales to Apple, or that the handset maker has found a cheaper supplier of audio chips. Andy Hargreave of Pacific Crest Securities commented: "It's clear that Cirrus's revenue from Apple is going down, but it could be because Apple doesn't need their part."