Apple (NASDAQ:AAPL) has been a pioneer in consumer technology, offering the world many innovative products over the decades. Most of its product releases have been well-received and sought-after by consumers.
This success has secured a loyal fan base prepared to pay premium prices for its products, generating billions in sales each year. Besides, Apple has ingeniously updated each popular product with iterations that expand the life cycle further.
For instance, in its recent March event, the quintessential California company announced numerous updates to its popular portfolio. Now, there is a cheaper iPhone SE with fast 5G connectivity. Last quarter’s metrics showed iPhone sales revenue of over $71 billion. No surprise, then, that Wall Street was excited.
Apple fans regard its products as a marvel of modern manufacturing, comprised of hundreds of components from different vendors. Consequently, the tech giant collaborates with other global firms for sourcing and manufacturing. The continued high demand for Apple products makes these suppliers even more crucial to ensure undisrupted production.
This collaboration ensures significant revenues for Apple’s suppliers. Yet buying these stocks to benefit from Apple’s metrics is a portfolio strategy often overlooked by investors.
With that strategy in mind, here are seven Apple supplier stocks that should benefit from robust sales of Apple devices in 2022:
- Analog Devices (NASDAQ:ADI)
- Broadcom (NASDAQ:AVGO)
- NXP Semiconductors (NASDAQ:NXPI)
- Qualcomm (NASDAQ:QCOM)
- Skyworks Solutions (NASDAQ:SWKS)
- Texas Instruments (NASDAQ:TXN)
- Western Digital (NASDAQ:WDC)
Apple Supplier Stocks to Buy: Analog Devices (ADI)
- 52-week range: $143.85 – $191.95
- Dividend yield: 2.06%
Wilmington, Massachusetts-based Analog Devices is a leading semiconductor company focused on manufacturing integrated circuits that process analog and digital signals. It benefits from the rising demand for semiconductors in the automotive, industrial, and 5G markets.
ADI released Q1 FY22 results on Feb. 16. Revenue soared 72% year-over-year (YOY) to $2.68 billion. Consequently, adjusted earnings increased 35% YOY to $1.94 per share. Cash and equivalents ended the period at $1.79 billion.
In August 20221, Analog Devices finalized its acquisition of Maxim Integrated. Analysts expect the transaction help ADI grow at an even faster rate. This positive momentum is already evident in its industrial segment, which reported 57% YOY growth.
Management sees factory automation and electric vehicles (EVs) as vital trends driving this growth. Analog claims to be the global leader in the fast-growing battery management systems used in EVs.
ADI stock trades at $146, almost flat compared to 12 months ago, yet it is still down more than 17% year-to-date (YTD). The stock briefly hit a 52-week low of $143.81 on March 14, before rebounding.
Shares have a cheap valuation at 19.4 times forward earnings and 8.4 times trailing sales. The 12-month median price forecast for Analog Devices stock stands at $210, suggesting a significant upside potential.
- 52-week range: $419.14 – $677.76
- Dividend Yield: 2.84%
Our next stock is another chip giant, namely Broadcom — one of the largest chipmakers by market capitalization. The company develops and produces a diverse range of semiconductor and infrastructure software solutions.
Wall Street notes it is poised to gain from the global rollout of 5G wireless technology. It is already seeing increased demand for its chips used in handsets, telecom equipment, and other devices.
Broadcom issued Q1 FY22 results on March 3. Revenue increased 16% YOY to $7.7 billion. Adjusted net income came in at $3.74 billion, or $8.39 per diluted share, up from $2.97 billion in the prior-year quarter. Cash and equivalents ended the quarter at $10.22 billion.
To reiterate the strong demand for Broadcom’s products, chief financial officer, Kirsten Spears, remarked, “the company’s hardware had an order backlog of over $25 billion at the end of the quarter compared with $22 billion in the previous quarter.”
In addition, the chipmaker issued Q2 revenue guidance above expectations at $7.9 billion. Investors were pleased with the strong demand from enterprise and cloud clients.
AVGO stock is priced at around $568, up more than 20% over the past 12 months. It also generates an attractive 2.8% dividend yield.
Yet, the stock has also been affected by the stock market turbulence and declined 13% YTD. Shares are trading at 17.9 times forward earnings and 9.2 times trailing sales. The 12-month median price forecast for Broadcom stock is at $700.
Apple Supplier Stocks to Buy: NXP Semiconductors (NXPI)
- 52-week range: $168.74 – $239.91
- Dividend Yield: 1.89%
Netherlands-based NXP Semiconductors is a chip manufacturer focusing on high-performance mixed-signal (HMPS) products. The company is a leading player in automotive chips that support advanced driver assist hardware, battery management, safety features, infotainment systems, and car electrical systems.
NXP announced Q4 2021 results on Jan. 31. Revenue jumped 21% YOY to $3.04 billion. Net income nearly doubled and came in at $602 million, or $2.24 per diluted share, up from $309 million in the prior-year quarter. Cash and equivalents ended the period at $2.8 billion.
The automotive segment revenue of $5.5 billion accounted for roughly half of its total revenue in 2021. Moreover, it saw a 44% YOY increase during the past year, generating $2.3 billion in free cash flow.
Now, management forecasts a 21% increase in total revenue in Q1. Investors noted that the increase means a slight deceleration in top line growth.
NXPI stock hovers around $173, down around 25% YTD. Along with a number of other tech names, it recently hit a 52-week low.
Shares now seem less frothy than many of its peers at 15.3x forward earnings and 4.8x trailing sales. Meanwhile, the 12-month median price forecast for NXP Semiconductors stock stands at $245, underlining its upside potential.
- 52-week range: $122.17 – $193.58
- Dividend yield: 1.79%
Next up is Qualcomm, well-known for its Snapdragon mobile processors and digital media processing units. It also provides essential modem technology for Apple devices. In addition, it owns patents critical to the 5G, 4G, CDMA2000, TD-SCDMA, and WCDMA mobile communications standards.
Qualcomm released Q1 FY22 results on Feb. 2. Revenue jumped 30% YOY to $10.7 billion. Moreover, adjusted net income surged 47% to $3.7 billion, or $3.23 per diluted share. Cash and equivalents ended the period at $6.6 billion.
The company has seen strong top line growth, benefiting from the 5G upgrade cycle, connected vehicles, and Internet of Things (IoT) markets. Investors were pleased that smartphone chip revenue increased 42% YOY, fueled by robust sales of its Snapdragon chipset for new 5G devices, whereas IoT revenue increased 41% YOY.
The metaverse is also becoming a significant growth driver. Qualcomm’s chips power the Oculus Quest 2 VR headsets manufactured by Meta Platforms (NASDAQ:FB). The company has also teamed up with Microsoft (NASDAQ:MSFT) to build custom AR chips and integrate their software platforms.
QCOM stock is priced at $142, up around 8% over the past year. However, it has taken a big hit lately, sliding almost 24% YTD.
Shares are trading at low multiples of 14.7x forward earnings and 5.4 times trailing sales. Finally, the 12-month median price forecast for Qualcomm stock is at $220.
Apple Supplier Stocks to Buy: Skyworks Solutions (SWKS)
- 52-week range: $127.34 – $204.00
- Dividend Yield: 1.76%
Irvine, California-based Skyworks Solutions manufactures semiconductors for use in radio frequency (RF) and mobile communications systems. The launch of Apple’s new 5G devices remains a crucial tailwind for the group. The iPhone 13 models are equipped with a couple of front-end modules from Skyworks.
Apple’s 2022 target stands at sales of 300 million iPhones, up from 236 million units it delivered last year. Nearly 60% of Skywork’s total revenue in fiscal 2021 was generated from sales to Apple. However, such over-reliance might signal trouble for the future as Apple plans to bring chip production in-house.
Skyworks reported Q1 FY22 results on Feb. 3. Revenue was flat at $1.51 billion. Non-GAAP net income came in at $523 million, or $3.14 per diluted share, down from $561 million in the prior-year period. Cash and equivalents ended the period at $876 million.
Skyworks’ connectivity chips, used for powering automotive solutions, IoT, wireless infrastructure deployments, and other 5G solutions, are also gaining enormous traction. This is evident from the 46% YOY growth in revenue from sales to non-mobile customers.
SWKS stock trades around $121, down more than 31% over the past year. The stock briefly hit a 52-week low of $119 a share on March 14, before rebounding.
Shares look undervalued at just 12.1x forward earnings and 4.55x trailing sales. The 12-month median price forecast for Skyworks stock stands at $180.
Texas Instruments (TXN)
- 52-week range: $161.04 – $202.26
- Dividend Yield: 2.70%
Texas Instruments is the market leader in analog chips and embedded processors. The chipmaker serves critical end markets, including consumer electronics, communications, industrials, and automotive.
Management announced Q4 2021 results on Jan. 25. Revenue increased 19% YOY to $4.83 billion. Net income jumped 27% YOY to $2.14 billion, or $2.27 per diluted share. Cash and equivalents ended the period at $4.6 billion.
The semiconductor giant remains shielded from the global computer chip shortage owing to its in-house production capacity. More than three-quarters of its revenue in 2021 came from the analog chips manufactured at its own factories. In addition, the company utilizes a 300-millimeter production process, making production significantly cheaper than its peers.
Texas Instruments recently announced plans to build two new wafer fabrication plants in Texas. This investment will further enhance its cost advantage and offer greater supply chain control.
TXN currently hovers around $172 territory, down about 8% YTD. It also generates an annual dividend yield of 2.7%.
The stock hit a 52-week low of $161.04 on Feb. 14. Shares are trading at 18.6x forward earnings and 8.7x trailing sales. Meanwhile, the 12-month median price forecast for Texas Instruments stock is at $199.
Apple Supplier Stocks to Buy: Western Digital (WDC)
- 52-week range: $45.14 – $78.19
San Jose, California-based Western Digital is a leading supplier of data storage devices and solutions. The company is one of the largest computer hard disk drive manufacturers, along with solid-state drives (SSDs) and flash memory devices. Additionally, Western Digital provides data center devices and solutions, data storage platforms, and software solutions for enterprise servers.
Management issued fiscal Q2 FY22 results on Jan. 27. Revenue increased 23% YOY to $4.83 billion. Non-GAAP net income saw an impressive jump and came in at $724 million, or $2.30 per diluted share, up from $212 million a year ago. Cash and equivalents ended the quarter at $2.53 billion.
The persistent supply chain issues mean Western Digital should enjoy strong pricing power and continued high demand throughout 2022. In addition, the company benefits from solid sales growth tied to the gaming industry.
Management sees long-term growth opportunity in its data center business. Analysts highlight that its NAND flash-memory solutions are expected to become the standard in data centers over the next few years.
WDC stock trades around $45, down over 32% YTD. The stock briefly hit a 52-week low of $43.85 on March 14, before rebounding. Shares look significantly undervalued at 6.5 times forward earnings and 0.9 times trailing sales. The 12-month median price forecast for Western Digital stock stands at $73.50.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.