Apple (AAPL) Cuts Component Order, Jefferies Says; Suppliers Hit (QCOM) (SWKS) (AVGO) (CRUS) (TQNT)

December 14, 2012 10:57 AM EST
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Apple (NASDAQ: AAPL) is under heavy pressure Friday, but some suppliers are even weaker as word spreads component suppliers have received order cuts. This comes from Jefferies' analyst Peter Misek.

According to Misek, Apple component suppliers have received order cuts in the last 24-48 hours, although he believe assembly orders remain unchanged.

"Our checks indicate the builds at the assemblers (Hon Hai, Pegatron, Jabil) have remained constant since then. But in the last 24-48 hours, component suppliers have seen large order cuts as the assembly bottleneck has not improved as much as hoped. We believe assembly is currently ~15M iPhone 5 handsets per month with a target of 20M/month in January. We had thought Apple would be further along the assembly ramp at this point and believe Apple will see extra charges due to the excess component inventory."

As a results, Misek is cutting December-quarter (CQ4) gross margin from 40.0% to 39.0%, which is still slightly above the Street at 38.6%.

Misek still believes demand remains robust, given there is still no iPhone 5 inventory at retail. In addition, they have not detected any finished goods inventory at suppliers.

On the iPhone 5 China launch he notes that it was surprisingly muted, although he notes the weather (snow) and required pre-ordering (to prevent riots) could be factors.

For CQ1, Misek cuts iPhone estimates and gross margin. He cuts CQ1 iPhone est from 52M to 48M and gross margin from 42.0% to 40.0% due to the mix shift and continued assembly execution issues.

Misek is reiterating his Buy and $800 price target on Apple, especially on weakness. "We still expect CQ4 and CQ1 results to exceed consensus and see a solid product launch pipeline."

Apple is down 3.2%. Looking at the suppliers, QUALCOMM Incorporated (Nasdaq: QCOM) is down 4.7%, Broadcom Corp. (Nasdaq: BRCM) is down 3.6%, Skyworks Solutions Inc. (Nasdaq: SWKS) is down 5.7%, Avago Technologies Limited (Nasdaq: AVGO) is down 3.6%, Cirrus Logic Inc. (Nasdaq: CRUS) is down 5.4%, TriQuint (NASDAQ: TQNT) is down 2.9%.

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