It hasn’t been a great month to own shares of Apple. But if you’ve been considering getting in, one analyst says now is the time to buy.
Shares of the iPhone-maker have dropped 17 percent in less than two weeks. But this an overreaction to bad news from parts suppliers.
Just a few weeks ago, Apple shares were selling for $222. They opened today at $188. And the company’s trillion-dollar valuation is long gone; Apple is now worth about $900 billion.
The selloff began after Apple predicted its revenue during this current quarter will total $91 billion. That’s below analysts’ expectations.
This was followed by more bad news: A number of companies that supply parts for the iPhone and other Apple computers lowered their predictions for their own revenue.
Apple share price: Take a chill pill …
But Morgan Stanley analyst Katy Huberty wrote in a note to investors this morning: “Weaker supplier guidance reflects Apple’s already more cautious Nov. 1 guidance, and importantly, doesn’t impact our services growth forecast, which is tied to installed base rather than new shipments.”
To put it another way, Huberty thinks component suppliers are reducing their revenue predictions mostly because Apple has lowered its own, not because of changes in their own businesses. And Apple’s long-term revenue prospects are good.
… or a grain of salt
Ben Bajarin, a technology analyst and columnist, warns that “trying to gain insight into Apple’s supply chain for signals is a fool’s errand.”
Apple buys some components in bulk. It also tries to source the same parts from multiple companies whenever possible. So just because a company received a big order from Apple in Q3 doesn’t mean it will get any business from it in Q4.
Also, the iPhone-maker doesn’t tell component makers what its future needs are. They have to guess that because they got X amount of orders in one quarter, Apple will need the same amount next quarter. But that’s just a guess.
Maybe Apple was stocking up on a component last quarter. Maybe it found it at a cheaper price somewhere else. If so, the parts maker has to lower its quarterly revenue estimates.
None of this bears any relationship to sales of the current iPhone models.
Definitely take the long view
One thing to keep in mind is that, a year ago today, Apple share price was $169. So it is up for the year. It’s even up over the past 6 months.
Apple shares started a huge rise in August, going from $190 to $228 in about a month. This occurred in the hoopla surrounding the company reaching a $1 trillion market capitalization.
All that’s really happened in the past few weeks is that balloon burst. And that’s a reason to buy Apple’s shares now. Or, as Morgan Stanley’s Huberty put it: “We’re buyers on unit-driven pullback given services and share repurchases drive future earnings.”