Few debates are more passionate than the one between iPhone and Android users. For iPhone loyalists, no other smartphone can compare, even if a feature-by-feature comparison reveals little difference. It’s about fit, feel, and finish. It’s about user experience … and user expectations.
So it was a little bit surprising when the Apple’s launch of a new iPhone platform in late 2017 fell flat. Was it a reflection of a saturated market? Or were true believers being converted.
Recent reports see the tide turning for the iPhone, which is expected to see a resurgence. One of the reasons for that is the iPhone is finding a new audience overseas. Apple has accumulated up to $230 billion in cash overseas and is preparing for exceptional growth in two key markets.
First, the company is anticipating a 170% increase in China. This is due to what Apple calls “significant pent-up demand” for the iPhone. Apple is also anticipating growth for the iPhone in India which is the world’s second largest smartphone market, but where the iPhone only has captured a mere 2%.
Add to that 300 million users with iPhones that are over two years old, and the company believes that their new products will offer the innovations that will get these users to upgrade.
But with Apple currently trading around $227, you may have to look at other areas to profit from Apple’s growth. And that means taking a look inside the iPhone. The companies that make some critical iPhone components are priced at levels that make attractive buying opportunities. These companies prove the adage that’s it’s what inside that counts.
In this report, we’ll tell you about 7 companies whose stocks can profit from Apple’s profit.
Quick Links
- Taiwan Semiconductor Manufacturing Co. Ltd.
- Universal Display Corporation
- Cirrus Logic
- Skyworks Solutions
- Dolby Laboratories, Inc.
- Jabil Inc.
- Broadcom Inc.
#1 - Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM)
Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) - Back in May, Taiwan Semiconductor started mass producing next-generation processor chips for iPhones. The new 7-nanometer chips will be smaller, faster and more efficient than its 10-nanometer predecessor. This means users will experience apps that run faster and phones that will run longer between charges. In an industry where innovation is short-lived, the promise of a phone that runs faster and requires fewer charges will help the iPhone have a, perhaps brief, competitive advantage. This will benefit TSM, which has faced some pressure from a computer virus that delayed earlier shipments. The delay has led to the company projecting a decline in anticipated third-quarter revenue of about 3 percent ($8.45 billion vs. $8.55 billion) and gross margin slipping by a percentage point. However, the company still anticipates an increase in revenue for the year. Apple accounts for approximately 21 percent of TSM's revenue. TSMC’s stock has risen to over $43 a share, well off its 12-month low of $35.51 and is now approaching its 52-week high of $46.28 reached in January 2018.
About Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. It provides a range of wafer fabrication processes, including processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others.
Read More - Current Price
- $161.94
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $200.00 (23.5% Upside)
#2 - Universal Display Corporation (NASDAQ:OLED)
Universal Display Corporation (NASDAQ: OLED) - One of the most exciting technologies available in the new iPhones comes from this Illinois company. Universal Display Corporation develops the technology that makes it possible for the latest generation of the iPhone to have a much thinner display screen than previous models. For consumers this means they get a larger screen with a phone that takes up less space in their pocket. Add to that, their technology allows the screen to light individual pixels so the new phones won’t use as much power as a traditional LCD screen, this means users won’t have to charge their phone as often and consumers can also enjoy a higher picture quality. One of the best news for this stock is that OLED owns both the parts and the patents for its technology. Like other Apple suppliers, OLED’s stock took a hit in early 2018 largely because the initial launch of the new iPhone’s was softer than expected. The stock dropped over 50% from its 52-week high of $209. However, the stock is rebounding on the anticipated increase in sales. At just above $120 a share, it is well of its 52-week low of $78.75.
About Universal Display
Universal Display Corporation engages in the research, development, and commercialization of organic light emitting diode (OLED) technologies and materials for use in display and solid-state lighting applications in the United States and internationally. The company offers PHOLED technologies and materials for displays and lighting products under the UniversalPHOLED brand.
Read More - Current Price
- $228.39
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $221.57 (3.0% Downside)
#3 - Cirrus Logic (NASDAQ:CRUS)
Cirrus Logic (NASDAQ: CRUS) - Despite rumblings that they might be supplanted by competitors, the audio-chip manufacturer retained its business with Apple. This is critical for a company that relies on Apple for 81 percent of its revenue. However, this left the company vulnerable to softness in sales from the new iPhones that launched at the end of 2017. So it’s no surprise, the stock has been battered lately, down nearly 50 percent year-over-year. Shares are currently trading at just over 11 times trailing twelve-month earnings. Its earnings-per-share (EPS) is forecast to drop to $2.96 from $4.27. But with analysts expecting healthier sales for a new generation of iPhones set to launch at the end of 2018, the forecast for Cirrus Logic is looking up. If CRUS can raise extremely low investor expectations, analysts see a 20 to 30 percent rise in their stock price with revenue growth of 5.4 percent and earnings per share rising to $3.25. The stock has been climbing recently and is currently trading at approximately $43.50, up from its 12-month low of $35.36 reached in late April.
About Cirrus Logic
Cirrus Logic, Inc, a fabless semiconductor company, develops low-power high-precision mixed-signal processing solutions in China, the United States, and internationally. The company offers audio products, including amplifiers; codecs components that integrate analog-to-digital converters (ADCs) and digital-to-analog converters (DACs) into a single integrated circuit (IC); smart codecs, a codec with integrated digital signal processing; standalone digital signal processors; and SoundClear technology, which consists of a portfolio of tools, software, and algorithms that helps to enhance user experience with features, such as louder, high-fidelity sound, audio playback, voice capture, and hearing augmentation for use in smartphones, tablets, laptops, AR/VR headsets, home theater systems, automotive entertainment systems, and professional audio systems.
Read More - Current Price
- $129.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $128.57 (0.5% Downside)
#4 - Skyworks Solutions (NASADAQ:SWKS)
Skyworks Solutions (NASDAQ: SWKS) - The story of Skyworks Solutions comes down to China. Skyworks generates approximately 40% of its revenue from Apple. However, it generates 64% of its revenue by supplying radio frequency (RF) chips for mobile devices, largely because it has aggressively sought to diversify its client base to capture this market. Skyworks Solutions now has their chips in China’s three largest smartphone makers. The largest, Huawei currently surpasses Apple’s sales in China. So why is this an Apple story? Because Apple is forecasting a significant demand for the iPhone in China. How much demand? Apple is anticipating a 170% increase in sales inside China. This should put SWKS in a great position to benefit from their existing client base in China, but also from a boost from additional iPhone sales. SWKS also is seeing growing revenue from its non-smartphone applications. Its “broad markets” category generated 26% of their $256 million revenue in the category. Their technology is now finding a home in smart homes and home security systems. The stock’s current P/E ratio is 14.23 and the stock is trading around $90 which is just above its 52-week low of $87.08.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Dolby Laboratories, Inc. (NYSE:DLB)
Dolby Laboratories, Inc. (NYSE: DLB) - Dolby partners with Apple in both their iPhones and their Apple TV product lines. Apple announced that they would be using Dolby’s Vision image technology in their iPhone 8, 8 Plus, iPhone X as well as the new 4K Apple TV. Although the technology is not new, Dolby’s commitment to finding partners to ensure that content would be available using Dolby Vision gave Apple the assurance it needed to commit to the technology. The opposite seems to be true with Apple’s decision to use Dolby’s Atmos surround sound technology with Apple TV. The technical advantages of the Dolby product will appeal to audio enthusiasts, but Atmos isn’t fully seeded in the marketplace as of yet. So, in this sense, Apple is hoping the combination of Dolby audio and video will contribute to their anticipated increase in iPhone sales to a consumer base that is ready to upgrade. Dolby’s stock is trading at just over $70 per share well of its 12-month low of $49.83 share. Second quarter revenue was up 3.85% at $317.45 million.
About Dolby Laboratories
Dolby Laboratories, Inc creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles. The company develops and licenses its audio technologies, such as AAC & HE-AAC, a digital audio codec solution used for a range of media applications; AVC, a digital video codec with high bandwidth efficiency used in various media devices; Dolby AC-4, a digital audio coding technology that delivers new audio experiences to a range of playback devices; and Dolby Atmos technology for cinema and various media devices.
Read More - Current Price
- $78.35
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $99.00 (26.4% Upside)
#6 - Jabil Inc. (NYSE:JBL)
Jabil Inc. (NYSE: JBL) - While many of the stocks on this list focus on what's inside the iPhone, Jabil produces the component on the outside, particularly the casing of the iPhone. Like some other Apple suppliers, Jabil's stock took a hit, dropping nearly 10% when sales from the iPhone disappointed in late 2017. However, the stock has rebounded from a 12-month low of $24.38 reached in February 2018 and is now trading at nearly $30 a share that would put it within striking distance of its 12-month high of $31.44 reached in September of last year. Jabil generates 25% of its revenue from Apple but also has relationships with other companies like GoPro and Cisco that helps ensure that they are less dependent on Apple for its growth. In their last reporting period, they reported a 21% annual increase in revenue to $5.44 billion and a non-GAAP EPS of $0.46, beating analysts’ estimates of $4.9 billion and $0.45. The company is also forecasting an approximately 8% increase in the next quarter (between $5.2 - $5.6 billion).
About Jabil
Jabil Inc provides manufacturing services and solutions worldwide. It operates in two segments, Electronics Manufacturing Services and Diversified Manufacturing Services. The company offers electronics design, production, and product management services; electronic circuit design services, such as application-specific integrated circuit design, firmware development, and rapid prototyping services; and designs plastic and metal enclosures that include the electro-mechanics, such as the printed circuit board assemblies (PCBA).
Read More - Current Price
- $110.38
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $142.63 (29.2% Upside)
#7 - Broadcom Inc. (NASDAQ:AVGO)
Broadcom Inc. (NASDAQ: AVGO) - Broadcom has a long-standing relationship with Apple. However, the semiconductor manufacturer increased the number of chips it provides to iPhones from eight to five including bringing wireless charging to the new iPhones. This led to expectations that AVGO would be a big winner when the new iPhones launched. However, that growth did not materialize right away, and Broadcom’s stock took a temporary hit as Apple accounts for approximately 20% of the company’s revenue. However, even if you’re not convinced that the iPhone is going to take off, there are many reasons to like this stock. That’s because the company is a market leader in 20 semiconductor franchise businesses. Growth through acquisition has been part of the company’s core strategy. The company also benefits from high costs of entry that allows them to enjoy little competition and therefore large profit margins. The stock is currently trading around $219 and some analysts anticipate it could reach a high of $300.
About Broadcom
Broadcom Inc designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.
Read More - Current Price
- $151.63
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $240.08 (58.3% Upside)
Apple is a stock whose story is still being written. And one of the largest chapters in that story is the iPhone. But while the iPhone is the signature product of an iconic brand, it’s a product that relies on many premium suppliers to help it generate revenue. However, the payoff for the businesses that supply the casings, display screens, semiconductors and audio/visual technology that contribute to the iPhone’s best-in-class reputation, is the way the popular brand is a rising tide that lifts many other boats.
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