Imagination Technologies shares plunged as much as 69% in London trading today. Imagination Tech develops and licenses silicon and software intellectual property for system-on-chip devices. Shares are down on news that Apple decided to cease using the company’s graphics technology for new products including phones, tablets, and watches in 15 months to 2 years.
Why did the stock crater so much on the loss of a single customer? Apple accounts for about half of Imagination’s revenue.
At Young Research, we favor durable businesses with strong competitive positions. That isn’t am easily quantified variable, but it’s one we view as vital to minimizing risk and maximizing the probability of achieving long-term investment success.
Some are calling the plunge in Imagination shares a black-swan event, but when a single customer accounts for almost half of revenue in an industry famous for innovation and disruption, was it really inconceivable that Apple would decide to change suppliers?
You can read more about the sell-off in Imagination shares here.
Jeremy Jones, CFA
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