On Monday, Apple (NASDAQ:AAPL) revealed the next iteration of its bread-and-butter revenue generator: the iPhone 16. Of Apple’s total revenue output in fiscal Q3 2024, iPhone sales made up 46%. To stay in the smartphone game, the company faces a tough challenge against the competitively priced flagships of Huawei and Xiaomi (OTC:XIACF).
To make it happen, the iPhone 16 focuses on streamlined Apple Intelligence (AI), powered by the latest A18 chip. The fact that its acronym is the same for artificial intelligence (AI) makes it clear that Apple is gunning for a branding takeover, just as Kleenex became a synonym for any facial tissue.
AI should improve users’ experiences by taking cues from their actions. For instance, the phone’s Camera Control enables quick object identification to place objects into proper context. Likewise, AI expands to users’ note-taking, rewriting, and proofreading apps. Although not yet released, much is also expected of generative Image Playground as a way to integrate on-the-fly content manipulation.
On the hardware side, the iPhone 16 boasts the Super Retina XDR display with next-level contrast and granularity. The A18 chip uses TSMC’s miniaturization tech at 3 nm, making it 30% faster than the A16 while consuming less power.
Although it remains to be seen if Apple Intelligence will capture users’ attention enough to boost sales beyond expectations, it is fair to say that Apple is setting new standards for competitors. In turn, some companies could benefit from the new tech introduced with the iPhone 16 series.
Broadcom
As the company branched from networking, storage and wireless solutions to software infrastructure (via VMware (NYSE:VMW) acquisition), Broadcom Inc (NASDAQ:AVGO) has been one of the main beneficiaries of the AI hype. In May 2023, Apple made a deal with Broadcom for its film bulk acoustic resonator (FBAR) chips that link Apple devices.
This was a part of Apple’s broader move from 2021 to invest $430 billion in domestic infrastructure supply over five years. For the iPhone 16 series, Broadcom will be the key supplier of new WiFi 7 chipsets.
Over the week, AVGO stock suffered a 5% dip after the company announced Q3 results last Thursday. At a glance, Broadcom’s earnings were enough to beat earnings per share (EPS) consensus at $1.02 reported vs $0.95 EPS forecasted. Likewise, revenue grew 47% year-over-year to $13.07 billion, exceeding estimate by $110 million.
However, investors took note of Broadcom’s net income loss of $1.87 billion vs $3.3 billion net gain in the year-ago quarter. Although $1.35 billion can be attributed to a tax-related event, it reminded investors that Broadcom is still a cyclical company currently in the downward zone.
On the upside, Broadcom’s free cash flow, at $13.9 billion (accounting last three quarters) vs $12.9 billion in 2023 shows that VMware purchase was well worth it, having tracked 200% YoY revenue boost vs cyclical semiconductor division at just 5%.
At present, Broadcom stock appears to be undergoing a rally. Against the 52-week average of $125.25, AVGO stock is now priced at $145.41 per share. Nasdaq’s forecasting data still points to a substantial upside potential at an average AVGO price target of $198.66. Moreover, the bottom forecast is also above the present price, at $170 per share.
Qualcomm Inc.
Although the iPhone 16 is already exclusive in the wider smartphone arena, the iPhone 16 Pro is even more so. Qualcomm Incorporated's (NASDAQ:QCOM) latest Snapdragon X75 will power these models, while standard models will use Qualcomm’s previous X70 modem, also found in the iPhone 15 series.
The X75, first announced in February 2023, is the power behind Apple’s 5G connectivity, having 25% less circuit board space and yielding 20% less power draw.
In the meantime, Qualcomm continues to hold a substantial share in global smartphone SoC shipments, at 23% as of Q1 2024 per Counterpoint data, sandwiched between MediaTek’s 40% and Apple’s 17%.
At the end of July, Qualcomm published its fiscal Q3 earnings, showing an 11% YoY revenue boost to $9.4 billion alongside 18% net income growth to $1.8 billion. Of particular note is Qualcomm’s 87% automotive boost, reflecting the trend of more cars gaining cloud connectivity. At CES 2024, the company made it clear it aims to tackle Nvidia (NASDAQ:NVDA) with the Snapdragon Digital Chassis platform.
Against the 52-week average of $158.03, QCOM stock is currently $159.04 per share. Nasdaq’s forecasting places the average QCOM value at $220.71, with the bottom forecasting sharing the same price as AVGO stock, at $170 per share.
Cirrus Logic, Inc.
For people wondering why Apple devices have superior sound quality, the answer is Cirrus Logic Inc (NASDAQ:CRUS). The Austin-based company is the main supplier of Apple’s audio chips, codecs, power converters, active noise reduction chips and amplifiers.
In turn, the bulk of Cirrus’ revenue comes from Apple, at 88% as of Q1 FY25.
“While we understand there is intense interest in this customer, in accordance with our policy, we do not discuss specifics about this business.”
Nonetheless, the company aims to leverage that relationship as a ramp to diversify its Audio and High-Performance Mixed-Signal (HPMS) division. In May’s Q4 FY23 shareholder letter, Cirrus reported penetration into Android haptics and the broader long-term goal of supplying the laptop market with boosted amplifiers.
“We continue to view the laptop market as a promising opportunity in the coming years as we look to capitalize on disruptive secular market trends and expand our share.”
In August’s latest Q1 FY25 financial results , Cirrus Logic reported $42 million net income vs $15.6 million in the year-ago quarter, elevating its cash reserves from $352.3 million to $491.3 million. Having drastically beaten Q2 EPS forecast, at $0.8% reported vs $0.31 estimated, Cirrus Logic stock is up 58% year-to-date.
After the recent market pullback, CRUS is currently priced at $129 vs the 52-week average of $96.88 per share. The average CRUS price target is $157.5 while the bottom forecast is also above the current price level, at $140 per share.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.