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Which Stocks Will Benefit From The iPhone 5?


The iPhone 5 is expected to be one of, if not the hottest technology item going into the holiday shopping season, and as Apple (NASDAQ: AAPL) gets closer to the official launch of the phone, we are starting to hear more and more about which names will benefit from the release of the phone.
An article on AppleInsider notes that Broadcom (NASDAQ: BRCM) is giving Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) last minute orders, whih some analysts believe could be parts for the iPhone 5.
Broadcom’s chips are ARM-based, based on designs and intellectual property from Arm Holdings (NASDAQ: ARMH), as are all of the chips in Apple devices, such as the iPhone and iPad. There is also speculation that ARM-based chips could come to the Mac, but nothing has been confirmed yet.
The Taiwan-based company raised its fiscal guidance earlier this week, based on a recent batch of “rush orders.” While no one is sure that Broadcom is the customer that placed the orders, it has been speculated that Broadcom, along with Qualcomm (NASDAQ: QCOM), MediaTek and MStar Semiconductor could potentially be the customer. MediaTek and MStar Semiconductor trade in Taiwan.
Bloomberg did an analysis on why Broadcom is the most likely choice, and Taiwan Semiconductor’s other larger clients like Texas Instruments (NYSE: TXN) and Altera (NASDAQ: ALTR) cut their earnings estimates recently due to weak economic growth. Broadcom did not do that. In fact, it reaffirmed its forecast this week. Shares are slightly lower today, after their run up yesterday.
“Broadcom is the largest link between Apple and Taiwan Semiconductor,” said Richard Davenport, a Bloomberg supply chain analyst. “Broadcom appears to be a likely candidate for Taiwan Semiconductor’s rush orders. Taiwan Semiconductor’s data sticks out like a sore thumb,” he added. “We are seeing cuts on almost a daily basis.”
We may not see an official iPhone launch until October, but many are expecting the Cupertino-based company to announce the new phone perhaps as early as next week.
In addition to already being at AT&T (NYSE: T) and Verizon (NYSE: VZ), there are reports that Sprint (NYSE: S) could get the iPhone as well, which could help boost subscriber numbers.
Steve Jobs, and now Tim Cook have come up with the world’s most iconic phone, and based off this preliminary reports, it looks as demand for the fifth generation of the phone will be even more impressive than what we have seen previously. Piper Jaffray sees the potential for over 200 million iOS devices in a couple years, with more than 140 million of them being an iPhone. That is astronomical growth for a company worth over $300 billion.
No wonder why people were genuinely saddened to see Jobs step down last month. He truly has changed the world for the better.

Traders who believe that iPhone 5 sales will be exceptionally strong might want to consider the following trades:

  • In addition to Broadcom, Taiwan Semiconductor, Sprint could potentially benefit as subscribers go up.
  • ARM Holdings will also benefit, as the chips in Apple phones are ARM-based. ARM will generate revenues from the royalties of these chips being sold.

Traders who believe that iPhone 5 sales will not be as strong as many think may consider alternate positions:

  • Apple could come crashing down if there is a hint that growth is slowing in iPhone or iPad sales. Consider shorting if this happens.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.


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