Skyworks, Qorvo, NXP Semiconductors Earnings Could Signal Apple Rebound

Shares of Apple Inc. AAPL are up less than one percent this afternoon, but the stock could be headed for a greater rebound if its key suppliers report strong results. The first supplier, Cirrus Logic, Inc. CRUS, impressed both analysts and investors. The firm is currently up more than 18 percent. "They are hugely dependant on Apple," Apple expert Sean Udall told Benzinga. "I think they do anywhere from 80 to 85 percent of their business with Apple. Everybody talks about Apple, 'Was the guide bad?' I thought the guide was pretty good. I've covered the FX and channel inventory reduction, which definitely crimped the revenue production that Apple produced." Udall said that if investors take the guide for what it is -- and if they "want to be a little nervous about it" -- they could consider some weakness in China. But he disagrees with that line of thinking.

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"Maybe Apple iPhones have reached, even though they're gaining share, maybe there's a saturation point," Udall said facetiously. "It's like they don't believe…that only 27 percent of the installed base has upgraded. But if you just sort of say, if you want to be negative on Apple's guide, you have to also look at Cirrus' guide." And that's where things start to get interesting. "[Cirrus has] been so headway-reliant on Apple," said Udall. "There's always a risk they're gonna lose business. The one thing Cirrus always does, too, is they tend to guide very conservatively. They just beat the current quarter -- they came in at $282 [million]. They beat the $261 [million] consensus. They basically beat a guide that they actually raised last quarter." Udall said that Cirrus "just crushed last quarter's guide" and "beat numbers this quarter a lot." "They guided $290 [million] versus $274 [million] with nice gross margins," he said. "It's pretty hard to look at Cirrus' guide and not think that the Apple guide is the pretty typical sandbag Apple guide. I don't know if this will matter to Apple's stock. Here's what I do know: if we see Skyworks and NXP -- they're the two cleanest Apple suppliers. Qorvo is another one. If you see the other Apple supply chain chip stocks report as strongly as Cirrus did, you can almost take the Apple guide and say they're being highly conservative." Investors should get more details this afternoon when Skyworks Solutions Inc SWKS reports its fiscal 2015 third quarter results. Qorvo Inc QRVO will report its fiscal 2016 first quarter results on Wednesday, July 29 after the close. NXP Semiconductors NV NXPI will report its second quarter results the following day (Thursday, July 30) before the open. "Sometimes the food chain stocks are almost a better read through to Apple's guide than Apple's guide," said Udall, who serves as the CIO of Quantum Trading Strategies and is the author of The TechStrat Report. "Apple is gonna, notoriously, guide very light. That's Cirrus' story. I was in the stock. I bought it. I figured they would have a good quarter and they did. I'm gonna look at Cirrus and say, 'What's Skyworks, Qorvo, NXPI gonna do?' If all three of those are equally strong to Cirrus, I think we could see this Apple negativity trade [go away]. We could see Apple buck this negativity pretty quickly." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.