Our theme of Apple Component Supplier Stocks – which includes a diverse set of companies that supply components for Apple’s iPhones and other devices, has declined by about 8% year-to-date in 2022, roughly in line with the broader Nasdaq-100, although it has underperformed Apple stock (NASDAQ: AAPL), which is down just about 2%. So what’s weighing the theme down and what’s the near-term outlook like?
While the broader technology sector is being impacted by rising interest rates, Apple suppliers are being impacted to an extent by the ongoing semiconductor shortage, Covid-19 related disruptions in Asia, and surging costs. Moreover, demand growth could also cool versus the 2020-2021 pandemic period, as Apple’s sales growth moderates. Despite new iPhone and high-end Mac launches, Apple revenue is poised to grow by high single-digit levels, after rising by over 33% in FY’21. Demand for the recently launched iPhone SE has been weaker than expected, with Apple apparently planning to make 20% fewer SE devices over the next quarter, per Nikkei Asia. Apple has also reportedly reduced orders for its AirPods wireless earphones by about 10 million units. These factors are likely to impact the growth rates of Apple’s suppliers, as well, over 2022.
However, things should get better as the semiconductor supply crunch eventually eases and also as Apple launches its next-generation iPhone 14 this fall. The smartphone is expected to feature more substantial upgrades and possibly design changes versus the iPhone 13, boding well for suppliers from both a volume and per-device content perspective. Moreover, the ongoing 5G transition is also likely to help suppliers, who are largely focused on semiconductors, as mobile vendors have been looking to equip their mid-range and lower-end models with 5G.
Within our theme, materials specialist Corning (NYSE:GLW), which is a key supplier of the glass used on iPhones, has been the strongest performer, with its stock up by about 3% year-to-date, due to its strong Q4 results. On the other side, Qorvo (NASDAQ:QRVO) – a semiconductor player that supplies RF solutions – has fared the worst, with its stock down by about 17% year-to-date.
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 Month-to-date and year-to-date as of 3/30/2022
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