Which Apple Suppliers are the Most Vulnerable?

Which Apple Suppliers are the Most Vulnerable?

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What's bad for Apple is bad for Apple Suppliers. Should a falling share price concern investors in Apple's suppliers?

Disappointing guidance from Apple (AAPL) was enough of a reason for investors to sell and pull its shares below $500. Worse still was the damage done to shares of Apple suppliers Cirrus Logic (CRUS) and InvenSense (INVN). These companies also dropped sharply after they reported quarterly results. Are things really that bad for Apple’s suppliers?

Click on the chart below to view Apple's share price over time. 

Cirrus Logic started the selloff by guiding fourth quarter revenue lower. The consensus revenue estimate from analysts was $173.8 million, but Cirrus Logic expects revenue to be as low as $130 million. In its recently reported Q3, sales from its audio product segment dropped by nearly one-third to $206.4M. 

InvenSense reported Q3 earnings of $0.15 per share on revenue of $66.7M. Both figures missed consensus. GAAP earnings were $0.00 per share (the company actually lost $0.2 million). The company did add cash during the quarter: cash and cash equivalents rose to $266.3M, compared to $200.3M last year.

Two noteworthy figures in the statement of income are on the expense lines. Costs (SG&A and R&D) rose for both:

Screen Shot 2014-02-03 at 3.05.24 PM

Higher R&D activity means the company is adding innovation for its products, which is good news for investors.
In addition, cash flows from operating activities indicates higher inventories. Cash flows rose to $29.6M, compared to $6.56M last year.

Conclusion

Risks for Cirrus Logic will rise if Apple’s growth slows in the next few years. More than 80% of revenue may come from Apple alone. Conversely, investors might look instead at companies less reliant on Apple. This includes Broadcom (BRCM), Qualcomm (QCOM), Synaptics (SYNA), and Skyworks (SWKS).

Do you think Apple's forward guidance could spell trouble for its suppliers?  Use the list below to begin your analysis and let us know what you think in the comments. 

1.Apple Inc. (AAPL, Earnings, Analysts, Financials):Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $446.66B, most recent closing price at $500.60.
 

 

2.Cirrus Logic Inc. (CRUS, Earnings, Analysts, Financials):Develops high-precision analog and mixed-signal integrated circuits (ICs). Market cap at $1.07B, most recent closing price at $17.51.
 

 

3.InvenSense, Inc. (INVN, Earnings, Analysts, Financials):Designs, develops, markets, and sells micro-electro-mechanical system (MEMS) gyroscopes for motion tracking devices in consumer electronics. Market cap at $1.64B, most recent closing price at $19.69.
 

 

4.Broadcom Corp. (BRCM, Earnings, Analysts, Financials):Designs and develops semiconductors for wired and wireless communications. Market cap at $16.62B, most recent closing price at $29.76.
 

 

5.QUALCOMM Incorporated (QCOM, Earnings, Analysts, Financials):Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $123.64B, most recent closing price at $74.22.
 

 

6.Synaptics Inc. (SYNA, Earnings, Analysts, Financials):Develops and supplies custom-designed human interface solutions that enable people to interact with various mobile computing, communications, entertainment, and other electronic devices. Market cap at $1.94B, most recent closing price at $58.36.
 

 

7.Skyworks Solutions Inc. (SWKS, Earnings, Analysts, Financials):Together with its subsidiaries, offers analog and mixed signal semiconductors worldwide. Market cap at $5.94B, most recent closing price at $30.25.
 

 

 

(List compiled by Chris Lau. All data sourced from Zacks Investment Research except where otherwise indicated.)

 

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3 Responses to “Which Apple Suppliers are the Most Vulnerable?”

  1. Joe says:

    Pretty sure Invensense doesn't supply for Apple. They do most their business with Samsung.

  2. meveric says:

    Hi Guys,
    Can someone PLEASE HELP AND advise me on this:
    http://www.indiegogo.com/projects/first-education

    I would like to invest but dont know if it is a god idea, what do you recommend?

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