'Apple concept stocks' down on cautious sales outlook

An 11-percent plunge in Apple shares in after-hours trade on Wall Street after the release of its fourth-quarter results prompted selling among local suppliers soon after the local bourse opened, they said.

However, bargain hunters then turned active to take advantage of the losses suffered by these local suppliers, betting that Apple shares would stage a technical rebound later in the day, they added.

As of 11:09 a.m., shares of Hon Hai Precision Industry Co., which assembles iPads and iPhones for Apple, had lost 2 percent, dropping to NT$83.30 (US$2.87) off an early low of NT$82.30, with 44.84 million shares changing hands.

Metal casing supplier Catcher Technology Co. had shed 1.56 percent to NT$126.50, off an early low of NT$123.00, while rival Foxconn Technology Co. had fallen 0.82 percent to NT$84.40, recovering from an early low of NT$83.00. The benchmark weighted index was down 0.32 percent at 7,719.14 points.

“The lower-than-expected sales forecast for the first quarter by Apple has raised concerns that the high-tech giant is facing stiff competition, in particular from Samsung Electronics of South Korea,” Hua Nan Securities analyst Henry Miao said.

“Once Apple's sales go slower, its suppliers will no doubt feel the pinch of the impact, seeing their bottom lines depressed,” Miao said.

After Wall Street closed, Apple issued its expectations that revenue for the quarter to March will range between US$41 billion and US$43 billion, below an earlier market estimate of US$45.5 billion.

In the quarter ending in December, the U.S. firm posted US$54.5 billion in revenue, slightly lower than a previous market expectation of US$54.9 billion, while its net profit totaled US$13.1 billion or US$13.81 per share, which beat a market expectation of US$13.53.

Apple said its gross margin for the first quarter could range between 37.5 percent and 38.5 percent, compared with 38.6 percent recorded in the previous quarter.

“The lower gross margin forecast has stirred up worry that Apple will enter the low-cost smartphone market, which could cut contract manufacturing fees,” Miao said.

In addition, Miao said the market has speculated that Apple will shift to plastic casings from metal housings to lower production costs, and he added that “if the speculation proves founded, it could deal a blow to metal casing makers Catcher and Foxconn,” Miao said.

Miao said, however, that after heavy selling among local Apple suppliers, it seemed that investors were willing to hunt bargains on hopes that Apple shares would make a comeback later in the day after the 11-percent plunge.

“For short-term trading purposes, investors could buy on lows,” Miao said. “But, with uncertainty over Apple's sales lingering, investors should remain cautious about these suppliers in the long run.”

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