Is weakness in Jabil Circuit, Inc. guidance, an opportunity to buy Apple Inc stock?
Jabil Circuit, Inc. (NYSE:JBL) recently posted its earnings for second quarter of fiscal year 2016, which missed Street analysts’ expectations, on March 16. The guidance announced by Jabil for third quarter further disappointed the market and there was a drop in stock value of company by 9.11% following earnings release. Jabil reported revenue for the quarter stood at $4.4 billion with earnings per share (EPS) of $0.57. However, the Street was expecting revenue of $4.5 billion with EPS of $0.60.
Moreover, in the earnings release, Jabil’s management announced its guidance for EPS in the range of $0.12-0.18; conversely, the Street had some higher expectation of $0.51 EPS for the quarter. As per Cowen and Company, the weakness in Jabil posted earnings and guidance is an opportunity to buy Apple Inc. (NASDAQ:AAPL) stock, according to a note published for investors by the firm.
The analyst at the research firm doesn’t cover Jabil stock neither is very optimistic about Apple but he believes that the component supply chain will react negatively to Jabil weakness which is perceived as a lagging indicator for Apple. Moreover, Jabil’s CEO Mark Mondello’s statement, “Our updated outlook for the third quarter reflects reduced demand in mobility,” backs the analyst’s prediction of softness in Apple’s revenue in the third quarter, as Jabil’s electronic component is 25% dependent on Apple’s iPhone.
The overall market is of a similar stance. Jabil couldn’t benefit from Apple’s success, but, softness in Jabil’s guidance will have an adverse effect on Apple’s outlook.