Shares in Largan Precision Co (大立光), a key supplier to Apple Inc, have continued to fall this month as some analysts voiced concerns about challenges faced by the smartphone lens maker.
The stock yesterday closed at NT$3,770 in Taipei trading, a nearly 20 percent correction from its closing price of NT$4,690 in this month’s first session.
Apart from sticker shock and seemingly slowing demand for this year’s trio of new iPhones, Largan could be facing other challenges, analysts said.
Amid the escalating US-China trade war, there are concerns about possible Chinese retaliation against Apple, which could dampen shipment momentum of new iPhones, Capital Investment Management Corp (群益投顧) said in a note on Tuesday.
“In the short run, market sentiment has a tendency to panic, leading to extreme fluctuations in Largan’s stock price,” Capital said.
However, Largan has benefited from the iPhone upgrade, Capital said, adding that its production yield rate and margins are expected to be excellent thanks to immense volume.
In addition, smartphone upgrades such as seven-piece lens construction and periscope lenses would continue to lead to strong profitability for Largan, it said.
A report by Yuanta Securities Investment Consulting Co (元大投顧) on Tuesday outlined demand uncertainty for the entire smartphone market in the short term on account of the trade war, which could affect Largan’s Chinese customers that use Android.
However, “Largan’s recent share price correction appears overdone,” Yuanta said.
Yuanta said it remains positive on Largan as smartphone makers in the Apple and Android camps continue to advance phone photography with more double and tri-camera designs next year.
The spike in volatility could be an opportunity for investors, Maybank Kim Eng Securities Ltd said.
“History suggests that any correction in Largan’s share price due to near-term demand hiccups has always been a good entry point for the longer term,” the Malaysia-based brokerage said in a report yesterday.
Largan shares dropped 47 percent in late 2015 and 50 percent early this year due to poor demand for the iPhone 6S and the iPhone X, but rebounded strongly on both occasions, Maybank said.
Meanwhile, Maybank expects slow demand for the iPhone XS and the iPhone XS Max, which are about US$100 more expensive than expected, while the lower-priced iPhone XS is facing competition from older models.
Apple has raised its average selling price by about 10 percent, which would lead to lower shipment volumes to the detriment of component suppliers, Maybank said.
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