Apple (AAPL, Financial) is excited about the launch of its iPhone 6. It is making grand preparations for the launch of its next iPhone. According to some sources, Apple is expected to launch its iPhone 6 in various sizes.
Apple has always been targeting high-end customers, and its operational efficiencies have always been lined for production of premium devices. A bigger iPhone from Apple is a strategic move to benefit from the emerging markets. As the smartphone market is gaining momentum with the 4G roll out in China, customers are shifting to smartphones. This changing scene in the mobile market presents a bright opportunity to Apple.
Apple has always made efforts to penetrate China as it is the world’s largest mobile phone market. In line with this focus, Apple has entered into a deal with Chinese telecom company China Mobile. With such a strategic move, Apple is set to benefit from 740 million mobile users. With such an opportunity, even Apple's suppliers should benefit. Let's take a look.
The Memory Beneficiary
Apple has many suppliers who play an important role in making the iPhone a best-in-class product. SanDisk (SNDK, Financial) is one such company that appeared in the iPhone last year with its flash memory. SanDisk is making impressive moves in the market and its outstanding results are a clear indication that the company’s growth will not fade away soon. Looking at its financials, SanDisk’s quarterly revenue rose by an impressive 43%, and its income climbed remarkably to $262 million, outpacing consensus estimates.
The fantastic results led SanDisk to post a strong outlook for the future, guiding revenue of $1.55 billion, which topped analyst’s estimate of $1.49 billion. Also, the company has raised its guidance to $6 billion.
Therefore, SanDisk is expected to see some solid benefits in the future. Apple is a big catalyst for SanDisk. Latest news has revealed that Apple is using SanDisk’s embedded SD cards in the retina MacBook Pro. This is a great sign for the company.
SanDisk has been impressive throughout the year, with a good 34%. Also, the company appears quite promising with a trailing P/E of 20. On the other hand, the upcoming products by Apple will surely benefit the company which will lead to better financials in the next quarter.
Two Radio Frequency Players - Take Your Pick
TriQuint Semiconductor (TQNT, Financial) is another player in the league. TriQuint’s performance has been outstanding and the stock has gained more than 65%. Also, on the earnings front, the company was impressive, beating consensus estimates.
The company is confident of sustaining this momentum in the future as well, and as a result, TriQuint is expecting its revenue to range between $245 million to $255 million while analysts were expecting $228 million. On the back of an awesome revenue guidance, TriQuint posted terrific estimates for EPS of $0.09 to $0.11 per share.
TriQuint has been a supplier of power amplifier modules to Apple and has been seeing good demand. Management, on the other hand, is optimistic about its strong outlook. The company is confident about benefit from iDevices. An added advantage for investors of TriQuint is that it is also a Samsung supplier.
However, besides these facts, TriQuint has seen growth in its book-to-bill ratio of 1.17 in the previous quarter. This is a clear indication that the company is seeing growth in demand. While looking at its ratios, TriQuint is reasonable with a decent forward P/E of 15.
Conclusion
Mobile giant Apple is surely benefiting its component suppliers. The above discussed companies are well diversified in their operations and have many other growth drivers. If any one of them would be just relying on Apple, it would have been a risky affair, but all these companies have other growth drivers as well, so the gains arising from Apple are like additional growth drivers for them.
