As reported on Friday, Jefferies said Apple (AAPL) component suppliers have received order cuts over the past two days due to what it believes is Q4 inventory being worked through.
While this may or may not mean anything as far as Apple is concerned (and we will debate this issue in another article), it is interesting to note that Apple suppliers were also hit hard on Friday.
However, a closer look at the charts reveals that the sharp drop in Apple supplier shares didn't start on Friday, but several days before. An even closer look reveals that some of these stocks have traded in tandem with Apple's stock ever since September, when Apple hit its all time high:
(click to enlarge charts)
So the next question is, was this carnage justified just because these companies supply Apple with components? And if it wasn't, is there opportunity in these stocks?
I have taken data from yahoo.com and plotted the current P/E, the future P/E and the one year target price for the above stocks based on analyst consensus:
| Name | Friday's decline | Price | 1-yr trgt price | P/E | future P/E |
| Broadcom (BRCM) | -3.64% | 32.06 | 40.7 | 25.11 | 11.32 |
| Jabil Circuit (JBL) | -5.50% | 17.51 | 24.55 | 9.36 | 6.35 |
| Cirrus Logic (CRUS) | -6.65% | 25.5884 | 50.63 | 15.97 | 6.97 |
| Skyworks Solutions (SWKS) | -5.94% | 19.8 | 31.38 | 18.86 | 8.56 |
| QUALCOMM (QCOM) | -4.67% | 59.8302 | 72.5 | 17.07 | 13.18 |
| Avago Technologies (AVGO) | -7.60% | 31.1397 | 40.79 | 13.84 | 11.16 |
| TriQuint (TQNT) | -3.31% | 4.68 | 5.81 | - | 28.47 |
If analysts have done their job correctly, then the stocks with the biggest upside potential, based on next year's target price consensus, are:
| Name | Price (Friday) | 1-yr trgt price | Difference | Possible 12 months % change |
| Cirrus Logic | 25.5884 | 50.63 | 25.04 | 97.86% |
| Skyworks Solutions | 19.8 | 31.38 | 11.58 | 58.48% |
| Jabil Circuit | 17.51 | 24.55 | 7.04 | 40.21% |
| Avago Technologies | 31.1397 | 40.79 | 9.65 | 30.99% |
| Broadcom | 32.06 | 40.7 | 8.64 | 26.95% |
| TriQuint | 4.68 | 5.81 | 1.13 | 24.15% |
| QUALCOMM | 59.8302 | 72.5 | 12.67 | 21.18% |
The winner by far is Cirrus Logic, with possible 12 month appreciation of 97.86%. Runner up is Skyworks Solutions with appreciation potential of 58.48% and third is Jabil Circuit, with 40.21% 12 month appreciation potential.
So as to answer the initial question -- the answer is yes -- the correction in the Apple supplier space is an opportunity, with Cirrus Logic at the top of the list, without ruling the other appreciation possibilities as negligible.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
