The amount of content that Broadcom supplies for each iPhone 8 sold will increase 40% versus the last version of the device
Broadcom’s revenue per iPhone 8 could rise to $16 or more
Wireless component supplier #Broadcom Limited (AVGO) appeared to indicate yesterday that the rollout of Apple’s (AAPL) new iPhone 8 would be slower than the launches of the iPhones that debuted in 2016.
However, Broadcom also suggested that it would obtain more revenue from each new model iPhone than the current generation of the device.
A number of Wall Street research firms, including JPMorgan, Loop Capital and Craig-Hallum, remain upbeat on Broadcom in the wake of its results and guidance.
The “initial ramp” of the company’s “major North American” customer’s next generation phone “[appears] slower this year, compared to prior year,” Broadcom CEO Hock Tan said on the company’s earnings call, apparently referring to the iPhone 8. He added: “But we believe, this will likely accelerate in our fourth quarter. Our third fiscal quarter outlook reflects this expectation.”
Asked a follow-up question from an analyst about whether the “slow ramp” comments were a matter of timing or magnitude, Tan replied:
“It’s timing. I think, it is timing and last year, the similar ramp was earlier — was stronger in Q3 probably because it was earlier. And here the initial volume in our fiscal Q2 was smaller, made up with content on our side, but definitely Q4 is forecasted to be larger.”
The amount of content that Broadcom supplies for each iPhone sold will increase 40% versus the last version of the device, the company also indicated.
The 40% increase in Broadcom’s content per iPhone was a positive surprise, according to Loop Capital analyst Betsy Van Hees. Broadcom is poised to benefit from its strong position in multiple, varied end markets, while it will also be boosted by its operating leverage, and accretion from its acquisition of Brocade (BRCD), according to Van Hees. She continues to identify the stock as a top pick and raised her price target on the shares to $285 from $270.
#Broadcom’s revenue per iPhone could rise to $16 or more, estimated Craig-Hallum analyst Anthony Stoss. Since the iPhone 8 probably won’t be delayed, Broadcom may surpass its guidance for its July quarter by a significant amount, the analyst stated. He raised his price target on the stock to $290 from $260 and reiterated a Buy rating on the name.
#JPMorgan analyst Harlan Sur raised his price target for Broadcom to $300 from $260, saying diversified growth and Apple iPhone content gains drove the Q2 beat and “strong” Q3 outlook.
OLED BEHIND DELAY?
Recent media reports have indicated that leaked photos purportedly showing Apple’s “iPhone 8” indicate that the next iteration of its highest-end phone may feature a curved glass OLED screen, no identifiable home button, a stainless-steel chassis and a dual-camera system. However, Apple Insider has reported, citing notes issued by influential KGI Securities analyst Ming-Chi Kuo, that Apple’s iPhone 8 may experience supply shortages through the end of 2017 due to the smartphone’s expected adoption of new technologies, including its OLED display.
The Nikkei Asian Review has recently added that analysts have speculated that OLED handsets could be delivered in late October or November, after the phone’s usual September release.
BAIRD SURVEY: Meanwhile, #Baird analyst William Power tells investors that his Apple survey to gauge demand for the next iPhone shows “solid, though not euphoric” demand, adding that there appears to be higher upgrade interest from older models than in past.
Better battery life and wireless charging were the most desired features mentioned by those surveyed, he noted. The survey doesn’t change his overall outlook, said Power, who continues to recommend purchase of the stock into the iPhone 8 launch.
PRICE ACTION: In morning trading, Broadcom $AVGO rose 7% to over $251 per share while Apple $AAPL added 0.4% to $153.73.
The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.