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Apple iPhone 7 Ramp To Slug Analog Devices On Declining Q2 Sales

Apple ‘s ( AAPL ) lukewarm iPhone 7 ramp may slug Analog Devices ( ADI ) early Wednesday, when the chipmaker is expected to report a 5% year-over-year revenue dip on a 40% sequential plunge in sales to Apple. But a “bright spot” of industrial and automotive sales will show a seasonal boost, outplaying rival Xilinx ( XLNX ), and wireless communication revenue will come off a trough to top competitors Nokia ( NOK ) and Cavium ( CAVM ), MKM analyst Ian Ing said Tuesday. In morning trading on the stock market today , Analog Devices stock was up a fraction, near 55.50. Shares are flat for the year vs. a 6% fall in IBD’s 38-company Electronic Semiconductor-Manufacturing industry group. Analog Devices stock hit a 2016 high on April 27 at 59.87, but it’s down 7% in the three weeks since then. In late April, Apple reported its first-ever year-over-year decline in iPhone shipments, in its March-quarter results. Analog Devices is expected to post $777.6 million in sales and 62 cents earnings per share ex items, down a respective 5% and 15% vs. the year-earlier quarter, for its fiscal Q2 ended on or near April 30, according to the consensus of 29 analysts polled by Thomson Reuters. That would follow flat Q1 sales and Analog Devices’ first EPS decline in 11 quarters. Wall Street expects typically strong Q3 and Q4 sales to also decline — by 2% and 6%, respectively. Over the past two years, Q3 had risen an average 13.5%, and Q4 sales had gained an average 20%. Recent reports indicate Apple suppliers are getting fewer orders compared with the year-ago period. Credit Suisse analyst John Pitzer expects Analog Devices to report $30 million in Q2 sales to Apple, down 40% sequentially. For Q3, he models $80 million in sales to Apple vs. consensus views for $110 million. “We suspect modest downside to our Apple revenue estimate for (the second half of the year) offset by upside to (industrial, automotive and communications),” he wrote in a research report. Apple accounts for about 10% of Analog Devices’ sales, Pitzer estimated. Views for $200 million in Apple sales for the latter half of 2016 would be down 15% year over year, but they still “might be $20 million to $30 million too high,” he said. But $1.33 billion views for automotive, industrial and communications sales, up 2% vs. the year-earlier period, doesn’t reflect accelerating advanced driver assistance systems (ADAS) and communications infrastructure opportunities, he wrote. Pitzer retained his outperform rating and 72 price target on Analog Devices stock. Ing kept his neutral rating and 56 price target. Analog Devices’ messaging has tilted in favor of “analog utility” investors vs. momentum growth investors, Ing wrote in a report. Analog utility investors prefer business-to-business ventures over “volatile” portables exposure.

Apple Supplier NXP May Beat Tesla Partner Nvidia To Autonomous Car

Apple ( AAPL ) chip supplier NXP Semiconductors ( NXPI ) batted the iPhone slowdown Monday by unveiling a radar, lidar and vision-sending engine that could beat Tesla Motors ( TSLA ) partner Nvidia ( NVDA ) to the autonomous-car punch. The product platform was revealed during NXP’s annual user forum in Austin, Texas, and comes as Nvidia stock has hit record highs the past two trading days on Wall Street after reporting eye-popping Q1 earnings after the close Thursday. Nvidia touted its machine-learning sales for the Q1 beat. Machine-learning, analysts and companies say, will be essential to creating safe, fully autonomous vehicles. NXP’s BlueBox engine incorporates “embedded intelligence and machine-learning required for complete situation assessments,” the company says. On the stock market today , NXP stock rose 2.3%, following its BlueBox announcement, to 84.97, putting it up a fraction for the year. Shares had hit a 19-month low during the February dip that hurt most Apple suppliers. Apple’s iPhone shipment decline has chip investors worried about the next semiconductor frontier, as smartphone sales hit the brakes. But NXP CEO Rick Clemmer recently told IBD that 40% of his company’s revenue stem from automotive sales. For its Q1 ended April 3, 21% of NXP’s sales stemmed from its smartphone segment. The BlueBox engine uses NXP silicon and software at each advanced driver assistance system (ADAS) node and incorporates radar, lidar and vision-sensing to complete a 360-degree world model around the vehicle. “This functionality greatly improves car safety by both managing and preventing emergency situations,” NXP says. And “unlike closed systems focused only on vision and other single-sensor data streams, the NXP BlueBox engine for autonomous vehicle is an open-source platform.” Programmers can customize BlueBox to their specifications, NXP says. The product already is in hands of customers of four of the world’s top five carmakers, NXP says. It has been shipping since September but now is broadly available.

How Much Will Apple Increase Its Dividend, Stock Buybacks?

With iPhone sales expected to fall on a year-over-year basis for the first time in the March quarter, Apple ( AAPL ) investors are shifting their focus toward the company’s annual adjustments to its capital return program. Apple is expected to increase its quarterly cash dividend and raise its stock buyback plan when it announces fiscal-second-quarter earnings on April 25. The question is: How much will Apple boost its capital return outlay? Last year, Apple increased its quarterly dividend by 11% to 52 cents a share and raised its share repurchase authorization to $140 billion from the $90 billion level announced in 2014. In total, Apple’s directors last year authorized an increase of more than 50% to the company’s program to return capital to shareholders. Under that plan, Apple expected to use a cumulative total of $200 billion in cash by the end of March 2017. Credit Suisse analyst Kulbinder Garcha on Friday said Apple could comfortably raise its capital return by about $10 billion per year over the next two to three years. “This would result in a capital return of about $53 billion per year, or roughly 8.5% of Apple’s market cap,” Garcha said in a report. Garcha reiterated his outperform rating on Apple stock with a price target of 150. Apple stock was flat, near 112, in midday trading on the stock market today . RBC Capital Markets analyst Amit Daryanani said March 27 that Apple could raise its dividend by 10% to 15% to get its yield above 2%. Apple also could boost its stock buyback program to $40 billion to $50 billion a year, compared with $35 billion last year, he said in a report. Earlier last month, Piper Jaffray analyst Gene Munster predicted Apple would raise its dividend by 5% to 10%. Apple Car Strategy Is Likely A Software Initiative Meanwhile, Mizuho Securities analyst Abhey Lamba on Friday reiterated his buy rating on Apple with a price target of 120. In a report, Lamba said Apple could make a bigger push into the automotive market with software-led developments in advanced driver assistance systems (ADAS). “We think Apple is likely to participate in the ADAS market in some way, even though it has yet to highlight its plans,” Lamba said. “Apple has clearly communicated its intentions of becoming a more pervasive part of the consumer lifestyle experience over time. “As it pertains to the auto market, CEO Tim Cook believes the industry could be poised for disruption with ‘electrification and autonomous driving’ in the near term. As an anecdote, we find evidence to support these ambitions in the company’s recent, aggressive hiring plans across engineering and operations.” While some analysts believe Apple is working on its own car, Lamba says it’s more likely the company will provide technology to current automakers. It already offers its CarPlay software to several major automakers. On Thursday, Motor Trend magazine provided its best guess at what an Apple Car might look like . Its artist conceptions show an almost egg-shaped vehicle with a glass ceiling and double-wide gull wing doors. RELATED: Apple iPhone Sales Could Fall For 3 Straight Quarters, Analyst Says Apple Should Be Valued Like Internet, Not Hardware, Company .