Apple (NASDAQ: AAPL) investors have plunged since the company's fiscal year 2018 fourth-quarter report. Indications point to a slowdown in sales of iPhone devices, a calculation that becomes less clear from 2019, when the company ceases to report specific sales figures instead of greater transparency in service provision.
The uncertainty surrounding Apple has caused chaos for many of the company's hardware vendors as well. Many people who rely on iPhone, Watch, and other revenue products have suffered so late due to the expected decline in unit sales in the coming year. Nevertheless, this weakness has created a buying opportunity for some vendors, especially those who rely not only on Apple as a technical giant, stave off hardware investors.
All about connectivity
Skyworks Solutions (NASDAQ: SWKS) has ridden Apple's coattails in the last decade, but when the iPhone sales have been bottled, it also has Skyworks & # 39; stock. Slow smartphone sales have pushed demand for the company's chips to enable network connectivity. In the company's fiscal 2018 fourth quarter, net sales increased by only 2%, and management expects sales to be 4% in the first quarter of 2019. It has sent stocks rising above 40% from high levels achieved in early 2018.
Alt is not hopeless for Skyworks, though. The company continues to develop non-smartphone connectivity solutions, ranging from automated solutions to portable devices and smart home products. The upgraded 5G mobile network can also be a big boost as the company has released a portfolio of 5G antennas, infrastructure materials and 5G connectivity devices.
The couple with anticipated uptick in smart phone sales later in 2019, the growth of new connectivity chip uses – known as the Internet of Things – makes sales in Skyworks & # 39; stocks look exaggerated. The company's subsequent 12-month free cash flow price (money left after basic operations and investment costs paid for) relationship rests on 14.4 of this writing. Skyworks's future earnings-based price based on Wall Street estimates is 8.9, which means a large jump in the bottom line this year.
ebb memory chips … for now
shares Micron Technology (NASDAQ: MU) surrendered in 2018 as Wall Street analysts predicted a decline in the memory chip sector this year. Since peaking at the end of spring, the share has lost half of the value. Reason? The management has confirmed that the company is actually in the midst of a digital memory demand contraction. Annual revenues are expected to fall 14% to 22% in the company's fiscal 2019 second quarter, and the result is set to fall even further.
Micron sells products to a diverse group of customers, so the blame can & # 39; Not posted on the iPhone. Nevertheless, memory chip surpluses at device manufacturers, automakers, and data center operators will take some time to work down. In addition, there is no telling how far the demand will fall or how long it will last. This gives an unknown number of close-ups on Micron's top and bottom lines, allowing multiple price reductions to be in order.
While the company's management says the view is still overcast, it is expected to pick up again in the second half of 2019. As Micron issues more specific language around an expected recovery for its memory products, stocks will again show signs of life. Meanwhile, investors interested in Micron should buy the shares at a time.
Power Management Solutions for All
ON Semiconductor (NASDAQ: ON) A power management and sensor chip manufacturer is also on Apple's official supplier list. Despite headwinds in consumer electronics such as smartphones, the company has performed well in the automotive industry and expanded power management solutions for other industrial applications. The year's sales and earnings per share in the third quarter of 2018 were 11% and 52%, respectively.
Sales in the fourth quarter are expected to increase at least 7% in 2017, and ON's bottom line should increase even higher as profit margins improve. Despite the rosy outlook, slow performance in some of the ON end markets and a decline in earnings growth after the acquisition and integration of a competitor in 2016 have caused stocks to fall above 40% from the highs reached early in 2018.  The the steep decline and the ON management's overall positive outlook makes the warehouse look like a value headline in the new year. Trailing 12-month free cash flow price is 13.7 and one year's forward earnings earnings are just 8.3. Like Skyworks and other scattered Apple vendors, this means a much more profitable company next year, as new uses for the ON product portfolio continue to drive business performance higher.
The high-growth times powered by Apple's iPhone may eventually come, but that doesn't mean the company's suppliers are doomed. After an ugly end to 2018, some of these supplier teams look like real purchases in 2019 – not to mention the long term – as the growth of the digital economy continues to expand at a rapid pace.
Nicholas Rossolillo and his clients own shares of Apple, Micron Technology, ON Semiconductor and Skyworks Solutions. Motley Fool owns and recommends Apple and Skyworks Solutions. Motley Fool has the following options: long January 2020 $ 150 calls on Apple and short January 2020 $ 155 appeals to Apple. Motley Fool has a disclosure policy.