Apple stocks (NASDAQ: AAPL) is up around 5% since the start of the year, despite the coronavirus pandemic, driven by its solid balance sheet and its rapidly growing service activity, which makes it a haven of peace in a way. However, most Apple suppliers have not been as successful. Our indicative list of 6 key iPhone vendors – which includes Qualcomm, Skyworks, Broadcom, Jabil, Texas Instruments and Qorvo – remains down about 10% from the start of the year on an equally weighted basis, slightly worse than the wider market.
There could be two main reasons for this. First, Apple’s iPhone sales could be mixed in the short term, as there are few reasons why people are buying or upgrading to expensive smartphones at the moment, and this could weigh on short-term demand. component term. In addition, these suppliers are likely to face disruptions in their supply chains due to the pandemic, and it may take some time for things to return to normal. Admittedly, these trends will likely only have a short-term impact, with things picking up in a few quarters. Does this represent an opportunity for investors to choose Apple suppliers at reasonable valuations? We think so, and we give an overview below of some of Apple’s major suppliers. See our dashboard Trefis Theme: Apple iPhone Component Suppliers which compares some of the main financial and valuation measures of Apple and its main suppliers.
Skyworks (-2% YTD, market capitalization of $ 19.6 billion) manufactures semiconductors for use in radio frequency and mobile communications systems. While the stock is trading at around 24 times profit, despite the lack of revenue growth in the past three years, the outlook for the company may be solid. The upgrade to next-generation 5G networks is expected to fuel demand for high-end components, increasing the company’s revenue and profits. Skyworks, which generates about half of its revenue from Apple [[[ , could earn more than its competitors, because Apple should launch into 5G technology, by launching several 5G iPhones this year.
Qorvo (-9% year-on-year, market capitalization of $ 12 billion), is a semiconductor reader that supplies RF systems to Apple. The company is trading at relatively high multiples of around 36x, despite lukewarm revenue growth in recent years. However, the long-term image remains solid, as the 5G cycle stimulates growth. Canalys estimates that 1.9 billion 5G smartphones will be delivered over the next five years, surpassing 4G in 2023. Qorvo is also expected to benefit from an increased deployment of the 5G base station, which could take advantage of its amplifiers and components based on gallium nitride (GaN). Qorvo generates about a third of its revenue from Apple.
Jabil (-25% over one year, market capitalization of $ 4.8 billion) is a manufacturing company that manufactures envelopes for Apple iPhones and iPads. The smartphone giant is estimated to account for about a quarter of Jabil’s sales. Jabil’s stock has dropped about 25% since the start of the year, making it one of Apple’s most affected suppliers. This could make sense, as the company is very dependent on iPhone volumes and may not gain in value added during the 5G cycle, unlike other providers who may see higher prices. However, the stock trades at a relatively lower multiple compared to other Apple suppliers, potentially making it a better bet of value.
Qualcomm (-11% year-on-year, market capitalization of $ 88 billion) – major wireless technology sells application processors, modems and licenses wireless technology to major handset manufacturers. Last year, the company settled a two-year legal dispute with Apple and is slated to become the sole supplier of modems for the new 5G iPhones, unlike in previous years when rival Intel absorbed its share of Apple’s business. The company is trading at around 22 times the final profits, which seems relatively fair, given its leadership in the 5G space, with license revenues likely to grow as new generation networks intensify over time. worldwide. (Related: The Qualcomm action will overcome the COVID-19 crisis after $ 90?)
Did you know that Google’s revenue growth rate has been around 4 times that of Apple in the past 3 years, although Apple’s share price has increased by twice that of Google? Does that make Google a better investment than Apple? Find out or benchmark Is the 2x increase in Apple Google prices justified?
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