+ 1.73
+ 0.5%
+ 5.77
+ 1.73%
+ 5.82
+ 1.4%
+ 2.00
+ 1.21%

Can Avago Technologies Ride The Apple Supplier Wave?

August 27, 2015 7:53 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

Avago Technologies Ltd (NASDAQ: AVGO) closed up more than 7 percent Wednesday and jumped another 2 percent in after hours trading, but the company’s future might be hindered by its limited exposure to Apple Inc. (NASDAQ: AAPL).

Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga that he believes Avago is more diversified than Qorvo Inc (NASDAQ: QRVO), Cirrus Logic, Inc. (NASDAQ: CRUS) and Skyworks Solutions Inc (NASDAQ: SWKS). This could work in Avago’s favor if Apple and Google Inc (NASDAQ: GOOG) continue to fluctuate.

If Apple dominates the smartphone business, however, diversified suppliers may not perform as well as those who focus their efforts on Apple.

“I used to trade Avago when it was a $30 to $40 stock,” said Udall. “I like it to a point. I wasn’t as close to the name as some other names, like Skyworks, which I was really bullish on for the better part of a couple years.”

Udall said it is “possible” that Avago has “20 to 25 percent exposure to Apple,” but he thinks it is a “little bit lower.”

“In general, their smartphone exposure is a little lower than some of these smartphone stocks,” Udall explained. “None of these guys say [they supply for] Apple. They all say ‘high-end smartphones’ or ‘North American exposure.’ But Avago is a little harder to read.”

Avago reported a Q2 EPS of $2.24 versus the Street estimate of $2.14. Sales arrived at $1.735 billion versus $1.74 billion.

“Their quarter was pretty good,” Udall added. “I think they guided pretty strongly last quarter. Here’s how I would read this: the fact that everybody thought the world was ending and everybody thinks the Chinese market is this huge detriment…the fact that Avago just guided in-line sort of says that business is probably pretty good.”

That said, Udall doesn’t believe Avago’s rise has anything to do with earnings.

“The stock has come from $150 to $100,” he said. “Once a stock, even an expensive stock, drops 50 points (or 35 percent), it’s just not as expensive anymore. I think the stock was up today because it got hit so hard. The stock’s not up a ton after hours. I think people were hoping for more, because Avago has reported some hellacious beats in the past.”

Related Link: Skyworks Solutions’ Earnings Results Show A ‘Fundamental Strength In Apple’


Global Equities Research analyst Trip Chowdhry told Benzinga that investors may have “overcorrected” Avago.

“It seems like the pessimism that investors may have felt on Apple and its suppliers is not that serious at all,” said Chowdhry. “If you look at Avago, they just missed [sales], it’s not that serious. The impact from China is less severe than many people have been assuming. I think. Based on the numbers Avago put in, it could recover the decline in value.”

Chowdhry said the company might recover in the next 90 days.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

For the latest in financial news, exclusive stories, memes follow Benzinga on Twitter, Facebook & Instagram. For the best interviews, stock market talk & videos, subscribe to our YouTube channel.

Related Articles

5 Features From Apple WWDC's First Day That Stand Out To Gene Munster

Apple Inc.'s (NASDAQ: AAPL) Worldwide Developers Conference 2021 started Monday as a virtual event, with some key items being announced.  read more

Why This Analyst Is Bullish On Lumentum And AMD

On CNBC's "Power Lunch" Monday, Susquehanna Financial Group semiconductor analyst Christopher Rolland said he is generally more neutral on the semiconductor sector given the supply issues, but there are two names in particular that he would "highlight." read more

Barron's Post-Christmas Picks And Pans: Alibaba, Apple, Intel, Pool, Yelp And More

This weekend's Barron's cover story offers six travel and leisure stock picks for a rebound in demand. Other featured articles examine China's crackdown on tech giants, the iPhone maker's interest in automobiles, and how Barron's 2020 stocks picks have fared. read more

Benzinga's Bulls And Bears Of Christmas Week: Airbnb, Apple, Netflix, Nike, Tesla And More

Benzinga has examined the prospects for many investor favorite stocks over the past week. The week's bullish calls included big tech stocks and a telecom giant. A top electric vehicle maker and recent hot IPOs were among the bearish calls. read more