Apple shares suffered another sharp sell-off on Monday after two of its suppliers cut their earnings forecasts, in moves that investors interpreted as another sign of softening iPhone demand.
The stock fell for a third straight session, dropping almost 5 per cent and dragging the wider technology sector down with it.
By lunchtime in New York, Apple shares were trading at about $196 (€174.40), compared with a peak in October of about $232 each.
The latest leg-down means Apple has now lost about $190 billion (€169 billion) of market capitalisation since its high, more than the entire market value of large US companies including Walt Disney, PepsiCo and McDonald’s. On Monday alone, Apple shed more than $40 billion (€35.5 billion) of market value.
The information technology sector of the S&P 500 was off more than 3 per cent, over twice the decline of the broader US equity market index.
“Apple is a bellwether,” said Randy Frederick, vice-president of trading and derivatives at Schwab. “Whenever Apple appears to be struggling – for whatever reason – there is the perception that it will impact other tech companies as well. It may or may not be true, but that is the perception.”
Facial recognition
The latest slide comes after Lumentum Holdings, a supplier of 3D sensors that power the facial recognition technology on Apple’s latest iPhones, unexpectedly cut its outlook for its fiscal second quarter.
“We 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,” said Alan Lowe, Lumentum’s president and chief executive.
While Lumentum did not identify Apple as the customer in question, the warning came just hours after Japan Display, one of the main suppliers of iPhone liquid crystal display (LCD) screens, also cut its full-year guidance, citing “volatile customer demand”.
Lumentum shares tumbled more than 30 per cent in New York trading, while Japan Display ended the day unchanged.
Apple shares have come under heavy selling pressure over the past two weeks as investors increasingly question the growth outlook for the world’s most valuable company.
The stock lost its $1 trillion-plus valuation at the start of the month after it gave a disappointing outlook for the upcoming holiday season and unexpectedly said it would stop reporting unit sales for iPhones, iPads and Macs.
That has fanned concerns that demand for the company’s smartphones may have peaked. Analysts at JPMorgan on Monday predicted year-on-year declines in Apple’s smartphone shipments in both 2018 and 2019.
Strong indicator
Lumentum is seen as a particularly strong indicator of sales of Apple’s higher-priced iPhones because it supplies 3D sensors that are used in the Face ID system. Face ID was introduced in the iPhone X last year but has now been extended across the product line-up, including the new iPad Pro unveiled last month.
However, Lumentum does have other smartphone customers, such as Huawei, which could account for its warning. The smartphone market overall is suffering from softening demand from consumers in China, while Apple also pointed to weaker spending in India, Russia and Turkey.
Chipmakers were also under pressure on Monday after senior executives at semiconductor group Infineon Technologies gave indications of a sector-wide slowdown. Commenting on the company’s full-year results for the year to September, chief executive Reinhard Ploss said Infineon faced a “challenging” market, and that revenue growth next year would be at least 9 per cent, a downgrade from previous guidance of growth of at least 10 per cent.
Shares of Infineon were down 7.8 per cent in Europe while, in the US, Advanced Micro Devices was off more than 8 per cent in lunchtime trading, Nvidia was down 7 per cent and Intel was off 2 per cent.
“A comment from one chipmaker would spill over into any chipmaker,” Randy Frederick said. “The chipmakers are, among tech, a group that moves in tandem because it is somewhat of a commodity product.”
– Copyright The Financial Times Limited 2018
