In a move that should confound long-term investors, Apple (NASDAQ:AAPL) is down on concerns that the Apple-China Mobile (NYSE:CHL) deal hasn't been inked yet and on poor guidance from Apple supplier Jabil Circuit (NYSE:JBL). For long-term investors, none of this information is material to Apple's long-term thesis and perhaps points to a buying opportunity.
You can't lose something you don't quite have yet
It appears Wall Street is upset something has been taken from it that it never had in the first place. Apple has never inked the deal with China Mobile, so how can Wall Street sell the stock off in anticipation of...nothing? Of course, we can argue that Wall Street was anticipating this deal was going to happen – but to be upset that China Mobile came out today and said there is no deal currently in place is strange considering nothing has materially changed.
Of course, Apple (and its investors) would love to have access to China Mobile's 750 million subscribers. However, jumping in to take advantage of short-term movement then selling off when China Mobile denies the deal is inked is irrational thinking at its worst. It's safe to assume both Apple and China Mobile wants this. Apple would love access to China Mobile's 750 million subscribers and China Mobile wants to compete with China Unicom and China Telecom, Chinese carriers that already sell the iPhone.
Wells Fargo analyst Maynard Um summed up my feelings on this issue: "While the missing announcement may be perceived negatively, we see this as a non-issue and believe this is more of an issue of timing and ultimately expect an agreement to be reached."
Is Jabil's tail wagging Apple's dog?
In another example of Wall Street's myopia, analysts were quick to mark down sales of Apple's first-quarter iPhone sales expectations from Jabil's weaker-than-expected guidance. At first glance this makes sense; it is reported that Apple accounts for nearly half of one of Jabil's business units – the diversified manufacturing services business.
However, the analyst forgot to mention the diversified manufacturing services is only 44% of Jabil's net revenue in fiscal 2013. So, if these numbers hold (and are true), Apple is less than 25% of Jabil's revenue. It would be hard to glean if Apple is the cause of Jabil's poorer-than-expected outlook. For long-term investors to change their investing thesis on this probability seems rash.
What should you do?
In investing, many times the best decision is to do nothing. These could potentially be big stories, but right now they should be relegated to the "noise" status of your investing thesis. It appears the China Mobile deal is now a matter of when, not if, and Jabil Circuit's guidance isn't strong enough evidence for long-term investors to sell Apple.