Suppliers to iPhone maker boosted by US company’s record breaking quarterly salesMarkets are making an uncertain start after an overnight plunge on Wall Street and continuing concerns about the implications of the Greek election victory by anti-austerity party Syriza.US markets were unsettled by a series of poor results from a number of household names - from Procter & Gamble to Microsoft to Caterpillar - but one company managed to shine through.The most Apple exposed stocks in UK tech are: Imagination (around 35% of revenue), Laird (around 20% of revenue) and Arm (less than 10% of revenue). Largest beneficiary from Apple strength is Imagination given its significant revenue weighting and high operational gearing. The weak pound is also helpful for Imagination which combined with Apple strength may put upward pressure on estimates. Imagination may also see a higher royalty from the iPhone 6 (uses new intellectual property - GX6450) than the iPhone 5s (G6430) so royalty revenue growth from Apple could be more than the 16% increase in Apple’s combined volume (iPad plus iPhone).Laird seems to have partially missed the strong Apple fourth quarter as it is one of the only Apple suppliers not to have beaten/raised guidance which is a bit of a worry. Arm is in every mobile phone (Samsung, Apple, Sony) so the fact that Apple is taking share from Samsung should net off. Also Apple moved to Arm’s higher royalty V8 architecture in 2013 with the iPhone 5s so Arm is unlikely to get a higher royalty from Apple.Any increase in US rates this year would appear to be unlikely at a time when growth globally appears to be showing some signs of weakness, and while inflation appears to be heading lower, and as such those looking for clues about the timing of a rate hike are unlikely to get any comfort from this evenings Fed statement.OnTheMarket has launched with an estimated 4,500 estate agency branches but some clear shortfalls in its competitive offer to house buyers, house sellers and agents. However, we see scope for it to improve its model over time (dropping the ‘one other portal only’ rule, extending the ‘exclusive to OTM for a few days’ approach) and to stick around for some time given its economics. This will impact the incumbents’ profits in terms of lost customers and higher marketing spend. Initial signs are that OnTheMarket is hurting Zoopla much more than Right Move. Right Move still looks well placed to hold on to its market leadership in the UK property portal sector. However, this is already discounted in its valuation today in our view, even after the partial de-rating of the stock in the last year. Zoopla shares offer much better upside, taking a longer term view that OTM does not succeed – but it is being disrupted much more in the near term. Continue reading...
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