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iPhone Mix Should Drive Analog Devices' Q3 Guidance Higher

Analog Devices, Inc. NASDAQ:ADI, Apple Inc. NASDAQ:AAPL - iPhone Mix Should Drive Analog Devices' Q3 Guidance Higher

Analog Devices, Inc. ADI 0.11% is likely to report its April quarter results at the higher-end of its guidance range, with channel upside, BlueFin's Paul Peterson said in a report. The analyst added that the company’s core business was tracking ahead of expectations. He expects an improved iPhone mix and 2nd gen Apple Watch to drive Force Touch demand in the October quarter.

Better iPhone Mix, Apple Watch

“Ever since Analog Devices (ADI) secured the Force Touch solution in the iPhone 6s, the company’s performance has mirrored the iPhone supply chain, with tremendous growth at the outset of the production ramp followed by sharp reductions as iPhone 6s demand sagged,” analyst Paul Peterson wrote.

Analog Devices’ consumer business now appears poised for a turnaround. The Force Touch mix is expected to improve in summer 2016, with the iPhone 7 ramping and the iPhone 6/6+ builds ultimately moving to zero, Peterson said.

Moreover, the 2nd generation Apple Watch is likely to boost unit demand. While Apple Inc. AAPL 0.42% was a 13 percent customer in FY16, Analog Devices continues to be highly diversified, with top 20 customers representing merely 39 percent of its business. Also, industry checks indicate the company is gaining market share in the channel, the analyst mentioned.

“We continue to believe that ADI is an attractive stock at these levels as a leader in high performance analog with a dominant position in the highly coveted signal chain. And while expectations for the company’s Force Touch business have been justifiably tempered, the recent production forecast increases are a positive sign that this business is moving in the right direction,” Peterson stated.

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