AAPL Picking: 3 Stocks to Buy Because of Their Apple Partnerships – InvestorPlace
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Apple (NASDAQ:AAPL) has been one of the most remarkable investment success stories in the tech world over the past couple of decades. Yet, despite its behemoth status, Apple’s success is heavily reliant on a network of partners and suppliers. In fact, numerous external companies play crucial roles in powering Apple’s ecosystem. And, they inherently reap the benefits of Apple’s success through their collaboration.
More specifically, Apple conducts the majority of its research and development and in-house production. Also, it depends on third-party suppliers for necessary parts, cutting-edge technologies and other critical services.
I can’t stress enough that these partnerships are indispensable. Without them, it’s safe to say that Apple’s flagship products, such as iPhones, iPads, MacBooks and Apple Watches, wouldn’t have achieved their remarkable success. Accordingly, as Apple keeps innovating and expanding its product lines, its partners are increasingly poised to grow in tandem.
Let’s explore how Apple’s key partners are also set to reap substantial benefits.
One key partner benefiting from its close ties with Apple is Broadcom (NASDAQ:AVGO). Broadcom plays a pivotal role in Apple’s supply chain by providing crucial semiconductor solutions that power pretty much every Apple device. From iPhones to iPads and Macs, Broadcom’s chips are indispensable. They enable Wi-Fi and Bluetooth connectivity, thus cementing Broadcom’s position as a vital partner for Apple.
And, because of AVGO’s strategic partnership with AAPL, the company enjoys quite predictable cash flows. Since most device manufacturers utilize its connectivity solutions, Broadcom operates on a backlog basis in order to serve all of its customers. Therefore, its revenues tend to consistently grow over time despite the electronic devices industry itself being highly cyclical.
Artificial Intelligence (AI) advancements are likely to drive a new super cycle of electronic device sales. These include Apple rolling out Apple Intelligence along with iPhone 16. Thus, it seems that Broadcom remains well positioned for continued top and bottom-line growth. This catalyst should keep fueling its bullish case moving forward.
Another significant company that powers Apple’s devices is Taiwan Semiconductor Manufacturing (NYSE:TSMC). The Taiwan-based semiconductor foundry giant is the primary manufacturer of Apple’s custom-designed chips. This includes the mighty A-series processors found in iPhones, iPads and the M-series chips powering Macs.
Interestingly, Apple’s shift toward custom silicon has further strengthened TSMs’ already monopolistic position in the semiconductor industry. As the exclusive producer of Apple’s advanced chips, TSM has benefited tremendously in recent years. TSM’s role appears irreplaceable. It essentially runs a monopoly in the semiconductor foundry industry. Further, its revenues have risen at a rapid compound annual growth rate (CAGR) of 13.7% over the past decade.
Therefore, as Apple expands its product lineup and enhances chip performance, TSM’s expertise in advanced semiconductor manufacturing ensures it remains a critical partner in Apple’s supply chain.
The last pick on my list is Corning (NYSE:GLW). The specialty materials company plays an essential role in Apple’s product lineup. It supplies Gorilla Glass, the durable cover glass used in almost all of Apple’s devices with a screen.
Given Corning’s expertise in glass technology, I don’t think Apple is about to find another partner to replace Corning anytime soon. Therefore, Corning’s financials are likely to keep benefiting, especially with the iPhone 16 release potentially coinciding with a smartphone supercycle.
Evidently, despite an 11.3% decline in Corning’s revenues to $12.6 billion last year due to weakened global smartphone sales, Wall Street remains optimistic about a robust recovery ahead. In particular, consensus estimates suggest revenues could rebound to about $14.0 billion and $14.8 billion in fiscal years 2024 and 2025, respectively. This aligns with industry-wide expectations of a new smartphone super cycle.
An interesting aspect of Corning’s investment case is that the stock could be a compelling dividend growth pick. The company has already increased its dividend for 13 consecutive years, while shares are currently attached to a dividend yield of 3%. While the dividend has grown at a rather modest CAGR of 5.3% over the past three years, dividend growth could re-accelerate, with sales expected to rebound notably in the coming years.
On the date of publication, Nikolaos Sismanis did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nikolaos Sismanis is a professional research analyst with five years of experience in the field of equity research and financial modeling. Nikolaos has authored over 1,000 stock-related articles that focus on uncovering deep value opportunities, identifying growth stocks at reasonable valuations, and shining a spotlight on overlooked international equities.
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Article printed from InvestorPlace Media, https://investorplace.com/2024/06/aapl-picking-3-stocks-to-buy-because-of-their-apple-partnerships/.
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