Apple Inc. (AAPL) and Apple Supplier Stock Prices – Strange Divergence

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Apple Inc. and its suppliers are observing strange things happening between them. Their stock performances are diverging after a long period of moving up and down in sync. This divergence has nothing to do with the dependency of each supplier on the tech giant, and this makes it even weirder, says a report from CNBC.


Supplier – what is happening to them?

Major Apple suppliers, who generate a large percentage of their revenue from the iPhone maker, have remained relatively steady despite the fact that in the past two weeks Apple’s stock has been crushed. It has been observed that some have even succeeded at outperforming Apple’s stock in the long-run.

For example, Cirrus Logic is an Apple supplier that provides it and several other innovative firms with high-precision analog and mixed-signal integrated circuits. As of Tuesday, its year-to-date returns were 13%. Likewise, a 7% rise was noted in the shares of Multi-Fineline Electronix, which provides Apple with printed circuit and assembly solution. In the same period, Apple’s stock saw 11% decline in its shares.

More than 70% of the revenue of these two – Cirrus Logic and Multi-Fineline Electronix – comes from Apple. In the Q1, Apple’s growth was lackluster, and it even lowered its revenue guidance for Q2, and given these facts the divergence in stock performance is “counterintuitive,” the report says.

Another surprising fact is – other firms having a more diversified supply chain have seen their shares move in-line with Apple’s stock recently, and even underperformed the stock over the longer-term. For instance, InvenSense saw its stock decline by 25% since Apple Inc. reported below expectation earnings two weeks back.

In the past two weeks, shares of Skyworks also declined by 8%, and those of Jabil Circuit and Broadcom saw close to 3% decline. This contrasts with a decline of 11% in Apple shares. Less than 30% of the revenue of these companies comes from Apple.

Tracking supplier’s performance, helps track Apple

It is very much possible that some stocks have been mispriced, but the experts believe the impact of Apple’s bleak guidance is already visible on the firms heavily depending on the iPhone maker.

Brian Blair notes that major suppliers reported their earnings before Apple with many reporting weak June guidance numbers, similar to Apple’s own guidance for Q2. Blair is a principal investor from Grays Peak Capital, and his company tracks Apple.

This means that Apple Inc. suppliers stocks were not punished as badly, but they are still cautious about the second half of the year since nothing is known for sure about the iPhone 7 sales. “What we are doing at Grays Peak is paying a lot of attention to the supply chain,” he said. “We are trying to understand what exactly is happening there. That is going to be the best indicator of what’s going to occur.”

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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