3 Apple Suppliers To Watch As IPhone Makes Grand Entrance In China
Chris Lau, Kapitall: As Apple rolls out its latest products in China, investors will also want to watch these key Apple suppliers.
When Apple (AAPL) reports quarterly results on January 27, after market close, the companies to watch closely may be suppliers. Apple shares seem stuck in a trading range (within the $540 – $570 level) that began in December. But that's not the case for some related tech stocks.
[Read more from Kapitall: Stocks to Watch as Sales of New Apple iPhones Soar]
Investors could be waiting for results before committing to Apple shares, however these numbers will not include sales of Apple devices in China, which began on January 17. Judging from some of the photos, it looks like the iPhone launch was successful. This opens up an opportunity for investors to look at suppliers that will benefit if Apple succeeds in selling large volumes of the latest iPhones to the Chinese market.
Here are three suppliers to watch closely.
Skyworks Solutions (SWKS) already reported quarterly results on January 16. Although shares shot up, the company might have an even brighter future going forward. Skyworks is maintaining healthy margins, and expects its gross margin to be 44 - 45% in Q2. Even without the benefit of Apple, Skyworks’ solutions are included in Qualcomm’s (QCOM) reference designs. MediaTek will also be using Skyworks’ radio frequency chip.
Skyworks produces analog semiconductors, and in Q2, the company expects revenue to rise 11% to around $470 million. Skyworks also expects Non-GAAP diluted earnings per share to increase to $0.59, up 23% year-over-year.
Skyworks trades at a forward P/E of 14:
Click on the interactive charts below to view data over time.
Supplier Corning (GLW) makes Gorilla Glass that is used in Apple iPhones. But it may experience greater competition from GT Advanced Technology (GTAT). In November 2013, GT Advanced announced it was developing sapphire glass that will eventually be used in future iOS devices. Apple already uses sapphire to protect the home button and the camera lens on the current 5s.
GT Advanced Technology shares have nearly doubled in a one year period, although investors should also probably know that the company had around $252 million in debt as of the quarter ending September 2013. Demand in China, and other emerging markets like India, should be followed closely.