Are iPhone 6 Suppliers Ready for a Sell-Off?
The next iPhone, which is expected to have a larger screen, is predicted to meet with a massive consumer reception because it will close the gap in the size of the display with models from Samsung and rival phones using the Android platform from Google Inc. (NASDAQ: GOOG). In addition, Apple may discuss its first entry into the wearable technology market, with a device that the world has already christened the “iWatch.” 24/7 Wall St. wanted to take a brief look at the Apple suppliers that are expected to be potential winners from the launch.
As a reminder, many Apple suppliers are not allowed by Apple to confirm whether they are actually its suppliers. The implication here is that this means any would-be supplier could ultimately be left in a lurch. Another serious issue is that Samsung and other phone makers have likely anticipated a slowing trend in their own phones in the weeks or months after the iPhone 6 release, so they could have lowered or increased business with these same Apple suppliers.
If history holds true, the upcoming iPhone 6 should go on sale roughly two weeks after the announcement. As far as any other product releases, we will just have to wait to see what the company says before casting pre-judgment there.
There is a maxim in the investment community that needs to be remembered ahead of Apple’s release: “Buy the rumor (hype), sell the news (event).” This is far from a certain strategy, but it is something that many investors are likely to consider this week.
One thing is known: as soon as these phones go on sale, teardowns will begin from websites and review sites to see exactly who and what is really inside the iPhone 6. Again, this means that there is still a degree of guesswork over the would-be Apple suppliers. Just because a company supplied parts in the past is no assurance that they will win today or tomorrow.
GT Advanced Technologies Inc. (NASDAQ: GTAT) is a would-be winner, and its shares have more than doubled and then some in the past year or so. The company signed up Apple in October of last year and its sapphire-based materials are expected to be used to make the new iPhone’s screen tougher. The company is said to have received upfront payments of several hundred million dollars from Apple, yet it is impossible to know exactly how much of the business is heading here ultimately. A potential score is if sapphire spreads to other smartphones, but again we cannot jump to conclusions yet.
GT has recently traded at $17.30 with a market cap of almost $2.4 billion. Thomson Reuters projects that its 2014 revenues will be $625.4. It has a price target of $19.23, and its 52-week trading range is $6.28 to $20.54.
Micron Technology Inc. (NASDAQ: MU) is trading at a cheaper price on the surface when compared to other Apple suppliers based on its forward price-to-earnings ratio (P/E), but this DRAM and flash memory player has seen its shares skyrocket over the past year and a half.
Micron recently traded at $33.10 and has estimates for its 2014 revenues at $16.3 billion. The price target is $38.44, and the 52-week trading range is $15.30 to $34.85. Micron’s market cap is now above $35 billion.