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Apple & 5 Supplier Stocks to Gain From Upcoming 5G iPhones

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Apple (AAPL - Free Report) is set to host an online event on Oct 13, wherein it is reportedly set to unveil new iPhones, including those supporting 5G.

The tech giant is speculated to launch four new iPhone models that include two cheaper iPhone 12 models at 5.4 inches and 6.1 inches, and two iPhone 12 Pro models with 6.1-inch and 6.7-inch screens. Notably, the 5.4-inch phone will be the smallest iPhone since the iPhone SE was released in 2016. The 6.7-inch model is the biggest ever.

Markedly, Apple guided during its third-quarter fiscal 2020 earnings call that the new iPhones will be on sale a few weeks later than the usual late-September release due to supply-chain issues caused by the coronavirus pandemic.

Per Bloomberg report, Apple is reportedly preparing its suppliers to mass-produce more than 75 million of the new 5G-enabled iPhones, which suggest that the demand for iPhones is holding up well despite the ongoing public health crisis. Moreover, shipments of its various iPhone 12 models are expected to be as high as 80 million units in 2020.

iPhone sales inched up 1.7% from the year-ago quarter to $26.42 billion, accounting for 44.3% of total sales in third-quarter fiscal 2020.

5 Suppliers Poised to Gain From 5G-Enabled iPhone 12 Sales

Apple has reached its highest install base ever, with more than 1.5 billion active devices in use by customers around the world. This Zacks Rank #3 (Hold) company expects fiscal fourth-quarter iPhone sales to benefit from strong demand for iPhone SE. Moreover, the launch of the new 5G-supported iPhones is expected to boost shipment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Analysts are, in fact, raising targets on iPhone share gains, which, in turn, brings spotlight on notable Apple supplier stocks, including Qorvo (QRVO - Free Report) , Skyworks (SWKS - Free Report) , Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , Synaptics (SYNA - Free Report) as well as Broadcom (AVGO - Free Report) .

Remarkably, even minimal changes in the demand of iPhone-related devices create a stir among Apple’s supplier base. In this context, investors’ optimism is likely to get a boost with regard to these suppliers, which depend on the iPhone maker for significant portions of their total revenues.

Year-to-Date Performance

Qorvo, a provider of radio frequency chips, generated 33% of its fiscal 2020 revenues from Apple. This Zacks Rank #2 (Buy) company is benefiting from the increase in production ramp of 5G smartphones. In fact, the company has raised its fiscal second-quarter revenue guidance, citing heightened demand for 4G and 5G mobile products utilized in flagship smartphones.

Solid uptake of Bulk Acoustic Wave (BAW) filters, with the reopening of economies, is expected to boost top-line growth. Notably, the Zacks Consensus Estimate for 2020 earnings has moved up 7% to $7.06 per share over the past 60 days.

Furthermore, Qorvo’s peer in the semiconductor radio-frequency market — Skyworks — is anticipated to benefit from the projected momentum in iPhone sales. In fiscal 2020, Apple accounted for 51% of Skyworks’ net revenues.

The Zacks Rank #3 company is well poised to gain from the surging demand for 5G handsets. Its offerings are widely used by Samsung and Motorola, nearest peers of Apple in the 5G supported mobile space.

Also, Skyworks is witnessing strong momentum for BAW-enabled modules in both mobile and broad markets. Notably, the Zacks Consensus Estimate for 2020 earnings has moved up 0.2% to $5.8 per share over the past 60 days.

Furthermore, Broadcom’s strength in the RF chips portfolio positions it well to capitalize on increased iPhone demand. Apple contributed nearly 20% to net revenues in fiscal 2019. Acceleration in 5G deployment, significant production ramp-up and increase in RF content are favoring this Zacks Rank #3 company’s prospects.

On Jan 23, Broadcom inked two separate multi-year agreements with the iPhone maker. Per the 8K filed with the SEC, the deals are collectively anticipated to generate $15 billion for the chipmaker.

Notably, the Zacks Consensus Estimate for 2020 earnings has moved up 2.5% to $22.05 per share over the past 60 days.

Additionally, Apple utilizes Taiwan Semiconductor’s advanced chips, featuring low power consumption, high performance and compact size, which puts it in this list.

More so, Taiwan Semiconductor — the world's largest dedicated integrated circuit foundry — is well poised to bank on the 5G boom backed by strength in robust 7-nanometer (nm) and 5-nm production processes. Notably, the consensus mark for 2020 earnings of this Zacks Rank #2 company has moved up 5.1% to $3.3 per share over the past 60 days.

Further, Synaptics’ top-line performance is likely to benefit from the launch of the new 5G-supported iPhones. This Zacks Rank #2 company is a display component supplier of Apple.

Synaptics anticipates total revenues for fourth-quarter fiscal 2020 in the range of $260-$290 million. It has provided a wider-than-usual guidance that takes into account coronavirus-led supply chain woes. The company anticipates revenue mix from Mobile PC products to be 45%.

Notably, the Zacks Consensus Estimate for 2020 earnings has moved up 7.3% to $6.3 per share over the past 60 days.

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