Despite a delayed launch, the iPhone 12 has taken the market by storm. According to Counterpoint Research, the iPhone 12 became the world’s top 5G model within a few weeks of its launch. The iPhone 12 and 12 Pro together snapped up nearly 25% of total smartphone sales in October. A report by Consumer Intelligence Research Partners conveys a similar story. It notes that iPhone 12 models accounted for 76% of new iPhone sales during October and November.
For the quarter ended December 31, 2020, Apple’s (AAPL) iPhone sales climbed 17.2%, driven by the latest iPhone 12 launch. There is much pent-up demand for the 5G upgrade, especially for the iOS base, which is manifesting itself in brisk purchasing activity. In addition to buying AAPL stock to capitalize on robust iPhone sales, investors should consider semiconductor stocks as direct suppliers to AAPL. Their advanced chips are the driving force behind the iPhone.
Broadcom Inc. (AVGO – Get Rating), Micron Technology, Inc. (MU – Get Rating), and Cirrus Logic, Inc. (CRUS – Get Rating) are three longtime suppliers of chips to AAPL. These companies have strong business models, and we believe their exposure to AAPL increases the odds of their outperformance in the upcoming months.
AVGO supplies semiconductor chipsets to various industries, including data center, broadband, wireless, networking hardware, storage solutions, and industrial markets. The chipmaker operates through three segments: Semiconductor Solutions, Intellectual Property licensing, and Infrastructure Software.
AVGO is one of the largest suppliers to AAPL, garnering nearly 20% of its revenue from the iPhone maker. The touch screen controllers, Wi-Fi chips, Bluetooth chips and RF front-end modules that are manufactured by AVGO play a crucial role in iPhone and iPads. Its relationship with AAPL is stable because it signed a multi-year contract with the company in January 2020. As per the deal, AVGO will sell $15 billion of wireless components to the tech giant.
During the fourth quarter ended November 1, 2020, AVGO’s revenue rose 12% year-over-year to $6.5 billion, led by demand for networking from cloud and broadband from service providers. Its EPS for the quarter declined to $2.93 versus $6.35 posted in the same period last year.
Analysts expect AVGO’s revenue for the quarter ending January 31, 2021 to be $6.6 billion, representing a 12.9% increase year-over-year. Its EPS for the quarter is likely to increase 24.8% to $6.55.
AVGO ended yesterday’s trading session at $474.63, climbing 50% over the past year. The stock is trading close to its 52-week high of $476.38. During the past six months, AVGO gained 45%.
AVGO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
It has a B for Growth, Stability, Sentiment, and Momentum. It is ranked #7 of 96 stocks in the A-rated Semiconductor & Wireless Chip industry.
In total, we rate AVGO on eight different levels. Beyond what we have stated above, we have also given AVGO grades for Value, and Quality. Get all the AVGO ratings here.
MU is involved in the design, manufacture, and sales of memory and storage products globally. Compute and Networking Business, Mobile Business, Storage Business, and Embedded Business are the four segments through which the company operates. Memory products for the cloud server, client, graphics, enterprise, and networking markets, are among the products that MU produces.
MU has been supplying memory chips to AAPL over the past decade. Due to the expansion last year of remote working and virtual learning, data centers have…
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