What Oppenheimer Thinks Analog Devices' Miss Means For Apple

On Friday Oppenheimer issued a company note on Analog Devices Inc.

after the company reported disappointing preliminary F1Q results of $755 million vs. consensus $830 million. Currently, Oppenheimer rates Analog Devices as Perform while a price target is currently unavailable. Rick Schafer and Shawn Simmons, analysts at Oppenheimer, wrote, "We believe ADI has one of the most attractive business models in analog semiconductors...We highlighted ADI's concentrated exposure to Apple's iP6s as the primary driver of our December downgrade. While we are not surprised to see another datapoint portending weaker iPhone units, we are surprised that ADI's exposure (13% of revenues in FY15) would impact revenues by this magnitude." Analysts noted that the revenue miss was primarily based on weaker than expected revenues in the company's Consumer Portables business which has a connection to the recent weakness in Apple Inc.

For their investment thesis, Schafer and Simmons highlighted three positive catalysts that could drive the stock higher. 1. High margin business With both a diversified and sticky performance catalog Analog Devices has the ability to outperform competitors by focusing on their high-margin industrial and automotive markets. 2. Gross margin expansion is possible 3. Returning capital to shareholders Oppenheimer discussed that Analog is committed to returning 80 percent of its FCF to shareholders over the next 5 years. Currently, Analog Devices is trading at $49.14, down 2.69 percent. Currently, Apple Inc. is trading at $96.70, down 2.83 percent.