Apple Supply Chain Stock is Too Cheap To Ignore
Jabil Circuit, provider of electronics and manufacturing services to various companies and industries, are suffering from a reduction in their stock value due to a number of different reasons. However, it is most probably due to recent difficulties with the market and a disappointing fourth quarter.
What is Jabil Circuit?
The company that provides electronics ranging from automotive parts to health-care electronics, is suffering due to a financial report that saw investors disappointed. Jabil Circuit, along with its electronics development programmes, also offer IT technical support services and operates in more than 27 countries worldwide. Despite some recent successes however, shares of the company have not been exactly static over the last few weeks. And now, yet again, they appear to been reduced as a result of recent troubles.
Jabil Circuit Has a Roller Coaster Stock Price
Their stock was trading around $18.5 in July 2012; rising to $24 in August it then dropped back to below $19 recently. After investors were concerned about the financial report the share price dropped. However, some are viewing this as a great buying opportunity, especially as the company is rumoured to be supplying parts for the ever popular Apple iPhone 5. The iPhone 5 is the backbone of the multi-billion dollar company and sells millions of devices worldwide.
Apple is one of Jabil Circuit’s biggest partners with the casings they make for the iPhone 5 accounting for 10% of their total income. Despite this, the margin on each casing is smaller than most would like it to be and as a result, investors are gradually losing faith in the company. Despite posting sales of more than $1.9 billion, investors were expecting a much higher figure.
For Q4, which ended on August 31st, 2012, Jabil Circuit reported an operating income for the last quarter was $144 million. This equals to about 39 cents per share. Operating income was about $175 million, or 59 cents a share. The board of directors has reportedly authorised the repurchase of £100 million worth of shares of common stock over the next 12 months. Analysts have predicted earnings of nearly $3 a share over the next couple of years.
The company is reported to have told investors, before releasing the financial report, that the short term miss was due to a challenging new project. This is possibly a reference to the companies new role in providing aluminium casings for US giant Apple.
Apple Employs Many Different Manufacturers
Apple employs many difference companies to produce the parts for its device. It outsources many of its operations to both India and China. This is usually due to reduced costs of manufacture and cheap land leasing rights than in the United States or other nations. This has cause controversy in the past as many believe this takes away vital tax dollars from the American people. Apple, along with other corporations, argue that it is vital to make their devices financially friendly to the consumer.