1 Incredibly Cheap Tech Stock That Could Rise 50% Thanks to Apple’s Prolific AI Move

Apple (AAPL 0.12%) has recently entered the fast-growing market for smartphones that can run productive artificial intelligence (AI) applications. Although the latest iPhone models won’t receive the company’s Apple Intelligence feature suite until October, demand for the latest devices looks good.

JPMorgan Analysts point out that delays in the delivery of Apple’s new iPhones are increasing, which indicates that the demand for these smartphones is healthy. Meanwhile, Dan Ives from Wedbush Securities said he believes Apple can sell 90 million new smartphones in 2024. This is an increase of 8 million to 10 million units compared to last year’s launch.

T-Mobile CEO Mike Sievert goes one step further and says that demand for iPhone 16 models is better than last year. All of this suggests that Apple could strike gold with its latest smartphones, which wouldn’t be surprising given the market. productive artificial intelligence Smartphones are predicted to have a compound annual growth rate (CAGR) of 78% by 2028, according to IDC.

Additionally, there is a massive installed base of 300 million iPhones that haven’t been upgraded in at least four years, according to Wedbush, which could trigger a massive upgrade cycle as customers move to productive AI smartphones.

One way investors can take advantage of strong sales of the iPhone 16 is by buying Apple shares. However, another company can follow Apple’s lead and make big profits thanks to the iPhone 16. Let’s take a closer look at this.

This Apple supplier could get a nice boost in profitability

corvo (QRVO -1.30%) It is a well-known supplier of radio frequency (RF) chips used in Apple’s devices such as the iPhone and iPad. The chipmaker is trying to do this diversify customer base and supplies chips to leading Android smartphone OEMs (original equipment manufacturers), but still received 46% of its total revenue from Apple in the previous fiscal year.

While Qorvo’s fate appears intertwined with Apple’s, sunny sales prospects for the latest iPhones bode well. Even better, Qorvo could be providing more chip content for new iPhones and thus making more money from each unit Apple produces.

During its fiscal 2025 first quarter earnings conference call a few months ago, Qorvo management noted that the company was investing in several long-term programs with its largest customer to increase its content and further grow its business. Moreover, a report of Chinese newspaper Economic Daily News Back in April this year, we noted that Apple had changed the design of the antenna module for the latest iPhone generation, thus using more chips from Qorvo.

It’s no surprise that Qorvo’s first-quarter financial results (for the three months ending June 29) impressed many. The company’s first-quarter revenue rose 36% year over year to $887 million. Non-GAAP Earnings were $0.87 per share, compared to $0.34 per share last year. Qorvo completed its acquisition of Anokiwave in the fourth quarter of fiscal 2024, which appears to have provided a nice boost to the chipmaker’s financial performance. Investors report that Apple is using Anokiwave’s offerings in its newest iPhones to improve signal reception.

Therefore, Qorvo could benefit from a combination of stronger shipping volume and higher revenue per unit from the new iPhone models. As a result, the margin improvement Qorvo has seen recently is likely to continue.

QRVO Gross Profit Margin data Y Charts

This improvement in the company’s margin profile is expected to lead to a healthy increase in the company’s earnings over the next few years.

QRVO EPS Estimates for the Current Fiscal Year data Y Charts

Investors can expect Qorvo shares to post solid gains

The chart above shows that Qorvo’s profitability could grow at an annual rate of 28% over the next two fiscal years. Assuming that Qorvo’s earnings do indeed grow to $10.25 per share after three years, and that it is trading at 15 times forward earnings at the time (in line with its five-year average forward earnings multiple), the stock price could rise to $154. This would represent a jump of almost 50% from current levels.

Interestingly, Qorvo is currently trading at 15 times forward earnings; That’s a discount of 45 times the average earnings of the U.S. tech sector. Therefore, investors should consider purchasing this stock at undervalued value. semiconductor stock Roll with your punches, as strong sales of Apple’s iPhones will boost Qorvo’s earnings power and could cause its shares to soar in the long run.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Hard Chauhan It has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and JPMorgan Chase. The Motley Fool recommends Qorvo and T-Mobile US. The Motley Fool has a feature disclosure policy.