Wednesday was supposed to be the glory day for Apple. After seven years of negotiations, China Mobile was supposed to announce an agreement to carry Apple’s iPhone. So far, there is no announcement, but the announcement may come later. The real reason Apple is falling is not China Mobile, but an earnings report from Apple supplier Jabil Circuit. Jabil makes moldings for Apple iPhones.
Jabil’s JBL earnings report was awful. Jabil sees second-quarter EPS of $0.05 to $0.15 vs. a consensus of $0.52; sees revenue of $3.5 billion to $3.7 billion vs. a consensus of $4.28 billion. Jabil stock has responded by falling about 21% and hitting a fresh new 52-week low at a time when most stocks are hitting 52-week highs.
On the conference call, Jabil put the blame on one customer. Jabil did not specifically name the customer, but in my analysis, after having followed both Apple AAPL and Jabil for years, I believe the customer is most likely Apple. Why? In the conference call, JBL made two points. First, the shortfall was in their DMS division, and Apple is a very large customer of DMS. Second, the shortfall was the result of a last-minute change by a customer, this is characteristic of consumer devices. No other DMS customer fits the profile. Jabil declined comment.
Of course, the question for traders and investors is what to do now? Let me first address the question for traders, then I will address the long-term investors.
Please click here for the annotated chart.
Let us start by looking at the annotated chart of the short-term trade on Apple that was conducted by subscribers to The Arora Report…Read more at MarketWatch
