>>> Apple color on guidance cut

Apple color on guidance cut
AAPL is indicated about 8.6% lower this morning, challenging 18-month lows as they stock extends its recent losing streak which saw shares decline more than 30% in the final three months of 2018.
  • Maxim Group: "AAPL negatively pre-announced December quarter (F1Q19) results of $84B (down 5% y/y, 8% below consensus and midpoint guidance) citing "lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance." Given revenue outside of iPhone grew 19% y/y, that implies iPhone revenue was down 15% y/y. Management also noted that "most of our revenue shortfall to our guidance, and over 100% of the our y/y worldwide revenue decline, occurred in Greater China across iPhone, Mac & iPad," and as such we estimate that revenue in China declined 24%-35% y/y'; the range resulting from assuming revenue in non-Greater China regions was flat-to-up 3% y/y (consistent with original midpoint revenue growth guidance). Noting that the iPhone represents ~55% of revenue and that the bulk of the shortfall is with iPhone, we then estimate that iPhone revenue in China was down 35%-50% y/y and that units were likely down a similar amount (i.e. ASPs were flat y/y). Magnitude of China iPhone miss unlikely purely attributable to a weak China smartphone market, leading us to assume an iPhone installed base haircut is forthcoming."
  • Cascend Research: "AAPL management has been disingenuous in our opinion: They tried to at least in part blame weaker Y/Y compares: this is not what is happening. This preannouncement runs counter to what AAPL's Head of Product Marketing said in late November (that the XR was the best selling iPhone since release). Are not reporting unit numbers in future quarters but said it was not because of weakness. Cut their supply chain orders severely enough for most companies to pre-announce or reduce guidance (1st week of November), but kept silent about its own issues for two months. Unprecedented discounts of iPhones worried us significantly."
  • Needham stays Buy rated on AAPL but lowers their target to $180 from $200 on the name after the company effectively pre-announced its December, 2019 quarter earnings last night. What firm liked most about the December quarter results included: 1) Over $10.8B of Services revenue, hitting record highs in every geographic segment of the world; 2) wearables revenue up almost 50% y/y; 3) 100mm of new active devices in its ecosystem; 4) $130B of net cash, which AAPL has said its goal is to get to net cash neutral; and, 5) all-time record revenue hit in several first world countries.
  • Monness Crespi & Hardt lowers their AAPL tgt to $200 from $300 based on nearly 19x their CY19 pro forma EPS estimate (adjusted for net interest income) that they believe is depressed, plus the company's net cash per share of $25.29.
  • Oppenheimer remains on the sidelines as they feel investors still aren't pricing in long term risk.
  • Read-throughs: B. Riley FBR feels AAPL's lowered guide is already reflected in supplier LITE's November guide (buyers on today's weakness). In the semi space B. Riley FBR feels implications span large- and small-cap front-end suppliers as they have repeatedly noted in the
    past month, though AMAT's display segment compounds exposure and risk.
  • Other firms out lowering ests/targets include: DA Davidson, Morgan Stanley, Bernstein, Raymond James, Piper Jaffray, UBS, JP Morgan, and RBC Capital Mkts.