Do Apple Suppliers Fall Far From The Tree?

Generally, the shares of a supplier tend to move along with the results of its OEM. The reason is obvious, better earnings from an OEM in all probabilities would boost the profits of its suppliers too.

On Tuesday, Apple Inc. AAPL reported a blow out quarter, driven by solid growth in iPhones and Services unit. Apple reported a solid first-quarter EPS beat of $0.14 along with nearly a $1 billion beat for revenues. The company exceeded estimates for iPhone sales of 76 million, selling 78.3 million.

Buoyed by strong results, Apple shares are trading at its July 2015 levels. They gained as much as 6.7 percent to set new 52-week high of $129.50.

On Wednesday, the day after earnings, shares of Apple suppliers Skyworks Solutions Inc SWKS and Cirrus Logic, Inc. CRUS too benefited from investors bullish sentiment and set new 52-week highs. Skyworks climbed as much as 3 percent to $94.49 and Cirrus Logic rose 5 percent to $63.39.

Universal Display Corporation OLED gained 3 percent to $67.88, and Taiwan Semiconductor Mfg. Co. Ltd. (ADR) TSM rose 1.2 percent to $31.31, a touch below its 52-week high of $31.61.

Historical Performances

In the past quarters, too, the trend has been similar barring the second-quarter report in April 2016. In other words, suppliers' shares have gained on good results and vice versa.

Let’s take a take how the suppliers' shares have performed in the past three quarters on the day after Apple results:

• April 27, 2016: Despite weaker results from Apple, Skyworks gained 1.5 percent, Cirrus Logic climbed 13 percent, and Taiwan Semiconductor gained 1.3 percent. That said, Universal Display edged down 0.5 percent.
• July 27, 2016: Following better-than-expected third quarter report from Apple, Skyworks rose 3.5 percent, Cirrus Logic increased 5 percent, Universal Display surged 8 percent and Taiwan Semiconductor advanced 0.5 percent.
• October 26, 2016: A day after Apple’s lower fourth-quarter results, Skyworks dropped 1 percent. Cirrus Logic fell 2 percent, Universal Display slipped about 1 percent and Taiwan Semiconductor declined 1.5 percent.