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RF Micro Devices (RFMD), a global leader in the design and manufacture of high-performance radio frequency solutions, was performing pretty well in 2013. However, the stock has been pushed into a downward spiral ever since it released its quarterly report. Even though RF Micro Devices reported decent revenue and earnings growth, the company's weak guidance failed to meet investors' expectations. Consequently, the stock has plunged 25% since then.

However, I think the recent slide in share price is the ideal entry point for opportunistic investors as I think the company's prospects are really strong. Let's take a look at the reasons why I think RF Micro Devices can yield terrific returns in 2014.

Apple's China Mobile Deal A Blessing

Apple's (AAPL) long-anticipated iPhone distribution deal with China Mobile (CHL), the world's largest wireless carrier, has finally materialized and this is a big plus for RF Micro. On 22nd December, Apple announced that it had entered into a multi-year agreement to offer the iPhone on China Mobile's 4G and 3G networks starting on January 17. Analysts are estimating that Apple could perhaps sell an additional 20 million iPhones in China in 2014. Moreover, Creative Strategies analyst Ben Bajarin noted, "There's pretty big pent-up demand on China Mobile for the iPhone. The deal, while huge for Apple, is underestimated by most analysts. It could very well ramp faster than any of us can imagine."

RF Micro Devices supplies chips to Apple and consequently the stock jumped 4.4% when this deal materialized. Investment bank Canaccord reported that RF Micro's components represent a larger share of the value of an iPhone. This means RF Micro's dollar content in the iPhone has grown over time and a "teardown" of the new iPhone 5S shows that RF Micro won at least three spots in the device. All in all, Apple's deal with China Mobile is a bonus for iPhone part makers and given that RF Micro's dollar content has increased, it will benefit the most.

Portfolio Expansion

Last week, RF Micro Devices added to its portfolio of Wi-Fi products to include two new front end modules, or FEMs, to its family of ISO/TS 16949-certified products, for automotive Wi-Fi applications. These modules combine the power amplifiers, noise amplifiers and switches needed to operate a wireless system. The company said, "Many drivers are already connected to data networks; of course, most often through the smartphones they carry with them. But the cars themselves are gaining connectivity as well."

As per ABI Research, shipments of connected automotive infotainment systems will increase from 9 million in 2013 to more than 62 million by 2018 with in-car Wi-Fi hotspots, multimedia streaming, connected navigation, and, social media as key features.

Multiple automobile manufacturers like General Motors (GM), Mercedes Benz, and Audi have already declared that they will be including a few of the aforementioned features in their upcoming cars. Audi plans to connect 1 million of its on-road vehicles by 2015 while General Motors has announced that it will include 4G/LTE connectivity and in-car Wi-Fi hotspots in many of its upcoming models like Buick and Cadillac model cars, Chevrolet, trucks and crossovers which will be made available in the U.S.A. and Canada in 2014. Thus, I think these additions will largely benefit RF Micro Devices.

Buy At Bargain Price

Presently, RF Micro Devices is trading at $4.51 and has a forward P/E ratio of 7.78. Comparing it to other chip makers will paint a clearer picture of RF Micro's cheap valuation. By comparison, other peers like TriQuint (TQNT) and Broadcom (BRCM) have a forward P/E of 17.38 and 11.61, respectively. This indicates that the stock is very cheap.

Furthermore, the institutional ownership in the company has also increased. Last week, Blackrock filed a scheduled 13G, disclosing that they have bought 28.8 million shares, or 10.2%, of the outstanding shares. This is another big plus for the company and I reckon investors should load up on the beaten down stock.

Wrapping Up

So, as we saw above, the company is well set to benefit from the Apple-China Mobile deal. The estimated increase in the iPhones' sales combined with the increase in dollar content will definitely boost RF Micro Devices' margins in 2014. In addition to that, RF Micro will also benefit from the increase in shipment connected automotive infotainment systems.

Moreover, the company is currently trading at a bargain price of $4.51, thus I think the recent slump in share price is the ideal point for new as well as old investors.

Source: 2 Reasons Why This Undervalued Tech Stock Will Outperform In 2014