Buy Broadcom, Cirrus Logic, Skyworks Amid Meaningful Improvement In iPhone Inventories

Pacific Crest analysts remain buyers of Broadcom Ltd AVGO, Cirrus Logic, Inc. CRUS and Skyworks Solutions IncSWKS amid meaningful improvement in iPhone inventories due to aggressive promotion by Apple Inc. AAPL.

The brokerage's "carrier surveys in North America and Western Europe indicate improvement in both sell-through and inventory management."

"With iPhone 6s inventories trending to the lower end of the targeted range, we see significantly less risk of an inventory correction ahead of the iPhone 7 ramp," analyst John Vinh wrote in a note.

BOGO Deals Deliver

The reduction in inventories was attributed to the return of BOGO (buy-one-get-one) promotions in May, resulting in substantial improvement in iPhone 6s sell-through and inventories. The promotions brought down store inventories to the lower end of the targeted range of 6–10 days.

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In addition, Vinh sees risk of a SAMSUNG ELECTRONIC KRW5000 SSNLF GS7 inventory correction, albeit more moderate, given unprecedented promotions.

The analyst said, "In May, T-Mobile US Inc TMUS resumed its BOGO promotions with the rest of the carriers, which kept inventories largely stable on a m/m basis. Additionally, Samsung has resumed its free VR headset promotion in conjunction with carriers running BOGO."

"With GS7 inventories increasingly modestly, despite unprecedented promotional activity, we still see increased risk of an inventory correction," Vinh noted.

Vinh has an Overweight rating on Broadcom, Cirrus Logic and Skyworks, with price targets of $185, $40 and $90, respectively.

At the time of writing, shares of Broadcom were down 0.09 percent at $162.43, Skyworks were down 0.62 percent at $66.52 and Cirrus shares were up 1.97 percent at $36.72.