While there has been no comment from Apple, one of the company’s suppliers, Lumentum, has released a reduced outlook for the quarter. Even though Apple was not mentioned in the report, the company confirmed that “one of its biggest customers” had delivered a reduced shipping request. There was already speculation that Apple was reducing production of its latest iPhone products and this announcement would seem to be the next bit of the jigsaw.
Life as an Apple supplier
Lumentum is a supplier of facial recognition products for use in the latest iPhones with Apple accounting for around 30% of revenues. While no figures were announced, there is speculation that Apple may have cut its shipment request by up to 30%. This would indicate there is reduced demand for the latest iPhone products which has led to some broker forecast adjustments. As we stand the Lumentum share price is down more than 17% at just under $39 with Apple shares down 4.5% at just over $195.
It is interesting to learn the short to medium term prospects for Apple via announcements made by the company’s suppliers. While Apple was not mentioned by name in the report we can safely assume the company was made aware of the forthcoming announcement. While the majority of brokers are looking to downgrade their guidance for the short term, Bank of America Merrill Lynch has taken a more positive stance. Bank of America Merrill Lynch suggested that the iPad Pro also uses the Lumentum face ID recognition system so the reduced shipment may not necessarily translate wholly to iPhone demand.
Slowly but surely it does look as all the market is being conditioned to expect lower iPhone shipment numbers than previously forecast. No doubt there will be an update from Apple in the very near future by which time the market may already have factored in the new scenario. We know that consumers are extremely fickle when it comes to new technology although Apple has always managed to surprise on the upside when it comes to quality and service. The iPhone is by far and away the most successful mobile device of all time. The company has managed to roll out improvement after improvement while maintaining and growing a product hungry client base.
It is also worth noting that the stock market is under pressure at the moment and technology shares are struggling more than most. We may well see more short to medium term downside in the Apple share price but there has been no major sell-off so far. This is a company which has proven to be extremely capable when it comes to managing expectations and slowly deflating the share price in the event of reduced forecasts.
It will be interesting to see the next update from Apple and whether indeed there has been a reduction in iPhone shipment expectation numbers. Lumentum has been a little cagey with its latest announcement, not mentioning Apple by name but suggesting it was one of the company’s largest customers. As Apple accounts for 30% of the company’s revenue we can safely say it is Apple that has reduced shipment numbers. Is this a short-term blip or the start of a decline in iPhone sales? Many have bet against Apple in the past and lived to pay the price.