Consider Buying Apple and a Few Apple Plays Before the Good Times Begin
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It’s been around three weeks since the iPhone 5 was officially introduced to the world. But, Apple (NASDAQ: AAPL) has faced flak from all over due to its lack of innovation in the iPhone 5, the Maps controversy, connection problems and what not. In addition, the company sold “only” 5 million iPhones over the first weekend this time, which missed analyst expectations by some distance.
It seems all these factors have weighed heavily on Apple’s stock price, which is essentially flat since the iPhone launched and is lacking the vigor witnessed last year after the release of the iPhone 4S. But still, the latest iPhone is the best selling version yet, and as I had said before, it won’t be prudent to base our opinions on just one weekend of sales.
Apart from that, Apple has historically faced one controversy or the other whenever it has released its phones (remember “antennagate” of the iPhone 4, problems with Siri and battery issues on the 4S). But the Cupertino-based giant has always come out unscathed and has fixed the problems.
I believe that Apple will make the bad good and the latest iPhone would better the records set by its predecessor and Apple’s stock price will be back in good health.
Also, it seems that the magnification of problems of the iPhone 5 has trickled down to the component suppliers. Companies such as Cirrus Logic (NASDAQ: CRUS), Skyworks Solutions (NASDAQ: SWKS), Broadcom (NASDAQ: BRCM) and OmniVision Technologies (NASDAQ: OVTI) have been trading quite deep in the red ever since the iPhone launch as the negativity has rubbed off onto them.
The Two Best Apple Plays
Skyworks Solutions was hammered into the ground late in September for reasons unknown. But Skyworks is one of the best Apple plays you can jump onto as the company also brings diversification to the table. It also provides its power amplifier modules to Samsung and has cutting edge innovation. Moreover, Skyworks’ management had already said a few months back that they expect strong revenue in the back-half of the year.
Analysts were of the opinion that Skyworks would improve its position in the iPhone 5 and the same turned out to be true when a teardown revealed that it was indeed the case. Skyworks supplied two chips for the iPhone 5 as against one in the iPhone 4S. More parts should mean more revenue and I’m eagerly looking forward to Skyworks next earnings report where it should silence the doubters.
Coming to Cirrus Logic, I call this company the most definitive Apple play as iDevices make for two-thirds of its revenue. Hence, I had thought that a better opening of the iPhone 5 than the 4S should be good news for Cirrus investors. But that’s not the case as the stock is trading more than 10% down ever since the iPhone launch.
But it should be noted that Cirrus had issued an astronomical guidance the last time it posted earnings. Hence, when Cirrus comes out with earnings later this month, you can count on a great year over year jump in revenue.
Look at These as Well
An astounding guidance had also accompanied the last earnings report of image sensor maker OmniVision Technologies. The company has been a supplier for iPhones and iPads, apart from supplying image sensors to other mobile devices and cameras. Moreover, it seems that OmniVision is finally getting around its margin woes that had hurt it earlier this year. And apart from Apple, OmniVision would find great opportunities to grow its business in a booming market for mobile devices.
As far as Broadcom is concerned, this is another diversified Apple play that you might consider for your portfolio. Like Skyworks, even Broadcom supplies to both Apple and Samsung, and the flagship smartphones of both companies feature Broadcom chips. Moreover, Broadcom is well-positioned to benefit from the data boom. The company is growing faster than the broader semiconductor industry, driven by its cutting edge technology and focus on emerging markets.
What Should You Do
Apple and its component suppliers have hit a trough now, but it shouldn’t be long before they hit their peak. The iPhone 5 has a number of catalysts to drive its sales. It is yet to be released across the world and there is the lucrative holiday season in the offing. Once the positives start flowing in for Apple, the suppliers should also get better.
Moreover, it is widely touted that Apple is slated to unveil the highly-anticipated “iPad Mini” later this month, which means that suppliers will have more room to run with another device. Thus, there are quite a few good reasons why you should consider getting more of Apple and its suppliers now as they are well placed to get better going forward.
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TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Cirrus Logic. 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.