Apple iPhone cuts leads Goldman to slash target price
By Oliver Haill
Date: Tuesday 13 Nov 2018
(Sharecast News) - After some Apple suppliers cut their guidance due to much-reduced shipments, Goldman Sachs slashed its target price for the iPhone maker.
"We are concerned that end demand for new iPhone models is deteriorating," Goldman said in a note to clients on Tuesday. "We note this could easily right itself given the bulk of demand comes in late December but we feel more prudent sell through forecasts are warranted due to the timing and magnitude of this warning."
On Monday, Lumentum, a manufacturer of laser light sources for 3D sensing lasers and known supplier to Apple, cut its quarterly revenue guidance by 17% following a request from one of its largest customers to "materially reduce shipments to them during the quarter for previously placed order".
Goldman's analysts worked out that the Lumentum customer in question is Apple and as a result reduced their total forecasts for iPhone units by 6% and FY19 revenue by 3.5%, with a 3% cut to forecasts for total revenue in the first quarter to $89bn, the low end of Apple's guidance given by the company alongside its quarterly results at the start of the month. Apple also said this month that it would stop reporting unit sales for iPhones, iPads, and Macs from next year.
On Tuesday, another Apple supplier, UK-listed IQE, snipped it guidance due to a reduction in shipments from a major semiconductor customer.
Reading between the lines was not difficult for Goldman. "While Apple may have already contemplated some weakness in its guidance, we feel the timing and magnitude of the [Lumentum] reduction suggests Apple is seeing incrementally worse demand data," analysts wrote.
With shares in the most valuable company in the world trading for around 16 times forecast earnings per share, Goldman's 12-month price target was cut to $209 from $222.
In the summer, Apple lost its second position spot in the global ranks of smartphone sellers, with China's Huawei leapfrogging the US group to follow market leader Samsung.
This month's results showed there were 46.9m iPhones sold in the fiscal fourth quarter, about flat with the 46.7m sold in the same quarter last year but below the 47.6m sales that analysts expected. Global iPhone sales for the entire year were up 1% year-on-year at just under 218m but increased prices helped Apple deliver record annual revenues of $265.6bn.
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