3 Stocks Rising With Apple's Tide
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you’re not in the market to plunk down $665 dollars for just one share of Apple (NASDAQ: AAPL) stock, be of good cheer. Now even small investors can position themselves in the market to take advantage of the upcoming iPhone 5 release.
Apple sold 37.04 million iPhones during1Q12, and each one of those phones required a plethora of suppliers to keep Apple’s production line moving. By purchasing stock in the best of Apple’s suppliers, investors can reap the benefits of Apple’s market strength with a substantially smaller cash investment.
By improving Apple’s designs, Cirrus Logic (NASDAQ: CRUS) has become the tech giant’s chip supplier of choice. Cirrus made the iPhone a better product by adding their DSP package to reduce noise and suppress echoes. Cirrus chips are found in virtually every Apple product, and the company satisfies 60%-70% of Apple’s chip needs.
Cirrus reports cash of $166.67 million, carries no debt, and has a ROE of 19.67%. Revenue and net income for the year ended March 30, 2012 was $426.843 million and $87.983 million; annual 2011 revenue and net income figures were $369.571 million and $203.503 million, respectively. Included in the net income figure of $203.503 million is a one-time income tax expense of -$119.289 million.
Analysts rate Cirrus as a strong buy and peg next year’s annual earnings at $821.07 million. Sales are projected to increase to $656.15 million and, with the stock up 55% for this month alone, should have no trouble reaching analyst’s estimates. The stock’s current price is around $39.00.
Qualcomm (NASDAQ: QCOM) provides Apple with critical power source chips that are smaller, lighter, and provide a longer battery life than their competitors. With Apple as their largest client, Qualcomm’s 3Q12 revenue was 40% higher than last year, coming in at $4.63 billion, and the company posted net income of $1.21 billion. Qualcomm was selected to provide chips for the new iPhone, Android’s Jelly Bean hardware, and Windows Phone 8 and more, and analysts estimate 4Q12 revenue at $5.27 billion.
Qualcomm has $13.40 billion in cash and only $1.35 billion in debt. This company pays a dividend of $1.00 and has a dividend yield of 1.60%, and a ROE of 17.31%. Annual revenue has increased annually from $10.982 billion in 2010 to $14.957 billion in 2011, along with net income reported as $3.24 billion in 2010 and $4.260 billion in 2011.
Analysts expect sales to increase 13.70% by September 2013, and the current EPS of $3.64 to increase to $4.09. Qualcomm is rated as a strong buy and their next earnings release date is set for November 6, 2012. The current stock price is around $62.00.
Of the three stocks presented here, Fairchild Semiconductor’s (NYSE: FCS) fortunes are the least tied to the smartphone giant. Apple represents only about 7% of Fairchild’s 2012 revenue and will suffer less should Apple’s sales start to decline. Fairchild sells 40%-60% of their low-cost discrete FETs and higher value analog power device chips to Apple for use in the iPhone, iPad and Macs.
Fairchild reports cash of $402.5 million against debt of $300.1 million, and a ROE of 5.39%. 2011 annual revenue came in at $1.588 billion, a decrease from 2010’s $1.599 billion revenue figure. Net income also declined and was reported as $144.5 million and $153.2 million, respectively.
Analysts give Fairchild a strong buy and are estimating next year’s annual revenue at $1.59 billion, and sales growth of 8.40% The stock’s current price is around $15.00.
The iPhone 5 is expected to sell 250 units and earn Apple $144 billion in revenue, a figure which dwarfs the $50 billion in revenue earned from all previous iPhone sales in the U.S., a fact which came out during the recent Apple-Samsung trial. If this prediction holds true, Cirrus Logic, Qualcomm and Fairchild Semiconductor stockholders may realize a greater return on their investment than they expected.
kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Cirrus Logic, and Qualcomm. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.