The Apple supplier could ride the iPhone maker’s tailwind, leading to an impressive share price rise.
Apple (AAPL 0.12%) recently entered the burgeoning market for smartphones capable of running generative artificial intelligence (AI) applications. The latest iPhone models won’t be equipped with the company’s Apple Intelligence suite of features until October, but demand for the company’s latest devices appears to be strong.
Analysts at JPMorgan say delays in delivery of Apple’s new iPhones are widening, a sign that demand for these smartphones is healthy. Meanwhile, Wedbush Securities’ Dan Ives said he believes Apple could sell 90 million new smartphones in 2024. This is an increase of 8 million to 10 million units compared to last year’s launch.
T-Mobile CEO Mike Siebert went a step further and said demand for iPhone 16 models is better than last year. All of this points to Apple potentially striking gold with its latest smartphone. This is not surprising as the generative AI smartphone market is expected to register a compound annual growth rate (CAGR) of 78% through 2028, according to IDC.
Additionally, Wedbush said there is a huge installed base of 300 million iPhones that haven’t been upgraded in at least four years, potentially triggering a massive upgrade cycle as customers move to generative AI smartphones. It is said that there is.
One way investors can take advantage of the iPhone 16’s strong sales is by buying Apple stock. But thanks to the iPhone 16, another company could ride Apple’s tailwind and reap big profits. Let’s take a closer look.
This Apple Supplier Could Significantly Boost Revenues
Qorvo (QRVO -1.30%) is a well-known supplier of radio frequency (RF) chips used in Apple devices such as the iPhone and iPad. The company is trying to diversify its customer base and supply chips to major Android smartphone original equipment manufacturers (OEMs), but it still derived 46% of its total revenue from Apple last year.
Qorvo’s fate seems intertwined with Apple’s, but the positive sales outlook for the latest iPhone bodes well. Even better, Qorvo could supply even more chip content to the new iPhones, allowing Apple to make more money on each unit it manufactures.
During the Q1 2025 earnings call a few months ago, Qorvo’s management said it was investing in several long-term programs with its largest customers to increase content and further grow the business. Furthermore, a report in the Chinese newspaper Economic Daily in April of this year pointed out that Apple changed the antenna module design in the latest generation of iPhones, thereby incorporating more Qorvo chips.
Unsurprisingly, Qorvo’s first quarter results (for the three months ended June 29) impressed many. The company’s first quarter revenue was $887 million, up 36% year over year. Non-GAAP earnings were $0.87 per share, compared to $0.34 per share last year. Qorvo completed its acquisition of Anokiwave in the fourth quarter of 2024, which appears to have provided a positive boost to the chipmaker’s financial performance. Investors should note that Apple is reportedly using Anokiwave’s products in its latest iPhones to improve signal reception.
Therefore, Qorvo could benefit from a combination of increased shipments and higher revenue per unit from new iPhone models. As a result, the margin improvements Qorvo has seen recently are likely to continue.
QRVO gross profit margin data by YCharts
This improvement in the company’s margin profile is expected to translate into healthy revenue growth for the company in the coming years.
QRVO EPS estimates for current fiscal year data by YCharts
Investors can expect Qorvo stock to deliver solid returns
The chart above shows that Qorvo’s revenue is likely to grow at an annualized rate of 28% over the next two fiscal years. Assuming Qorvo’s earnings actually jump to $10.25 per share in three years, and it trades at 15 times forward earnings at that time (consistent with the five-year average forward earnings multiple), the stock price is $154. is likely to rise. This would represent a nearly 50% jump from current levels.
Interestingly, Qorvo currently trades at 15x forward earnings, below the average earnings multiple of 45x for the US technology sector. That’s why investors should consider buying this undervalued semiconductor stock, as strong sales of Apple’s iPhone should boost Qorvo’s performance. It has high earning power and the stock price may rise over the long term.
JPMorgan Chase is an advertising partner of The Motley Fool’s Ascent. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Apple and JPMorgan Chase. The Motley Fool recommends Qorvo and T-Mobile US. The Motley Fool has a disclosure policy.
