Includes a helpful list of stocks not to buy.
From a note to clients by Rosenblatt’s Jun Zhang that landed on my desktop Thursday:
We believe Samsung’s supply chain faces increasing inventory risks. We expect some component inventory at Samsung to reach ~8-weeks, higher than the normal 4-week inventory level. In addition, we believe Samsung’s smartphone shipments may decline 8-10% y/y in Q4 due to weak sales for the Samsung Note 9 and midend products. We believe the weak sales are mainly due to Samsung losing share to Chinese OEMs in many markets, including the European markets.
We believe Apple’s supply chain may also face risks after the holiday season. We believe this is due to weak iPhone XS sales, as well as weaker than expected iPhone XR preorders. Apple’s initial component orders have been conservative, however, leading us to believe there is more likely to be a small correction in the Apple supply chain around the holiday season.
Overall, we suggest investors avoid smartphone supply chain companies. We highlight our cautious view on Universal Display, Skyworks, Qorvo , Synaptics, Dialog Semi, Cirrus Logic, AAC Technologies, Sunny Optical, and Mediatek. We believe STMicroelectronics and Maxim’s business at Samsung may also face some inventory correction risk.
My take: I’d worry more about Samsung’s suppliers.