Apple iPhone 6 Rumors Are Pushing This Hot Stock Higher

Shares of a hot tech stock continue to power higher on reports that Apple will be broadly adopting its products.

Jul 8, 2014 at 9:15AM

Pacific Crest upped its price target on InvenSense (NYSE:INVN) in a freshly published report, citing potential wins at Apple following a trip to Asia. In particular, the analyst believes that InvenSense has won the main gyroscope within the Apple (NASDAQ:AAPL) iPhone 6 and providing components to allow for optical image stabilization, and expects a win in the upcoming iWatch.

It could be true, but be careful
As noted in a prior piece, there is a lot of optimism surrounding InvenSense's potential involvement in the iPhone 6. As was the case with prior iPhone launches, that analysts are all singing in unison that InvenSense will power the iPhone 6 in some fashion.

However, it's also important to take these rumors – remember, they are rumors, after all – with a grain of salt. For example, the Pacific Crest analyst specifically points to optical image stabilization as being a part of the 4.7-inch iPhone 6, but other rumors suggest that only the larger, more expensive iPhone 6 variant will come with this feature.

Unfortunately, until the teardowns are in, all we have is -- at best -- intelligent speculation.

What if all of these rumors are true?
Let's suppose for a moment that all of these rumors are true -- that InvenSense is meaningfully inside the iPhone 6 and that it is also a big part of the upcoming iWatch. How will this ultimately impact the stock?

Well, right now the current analyst earnings consensus sits at $0.71/share for the current year and $0.96/share for the coming fiscal year (ending in March 2015 and 2016, respectively). These earnings estimates are predicated on 28.60% revenue growth for fiscal year 2015 and then an additional 21% in fiscal year 2016.

If these estimates do bake in material Apple content gain, then the shares don't really look all that cheap, as they already trade for about 25 times non-GAAP projected fiscal 2016 earnings (though for "hotter" tech stocks, sentiment and general business direction are more important than traditional valuation metrics). Further, if there is an Apple ramp built in but it's a no-show, then the stock could be vulnerable. However, if there isn't a material Apple ramp baked in here, then these estimates could prove too low, potentially sending the stock surging on a series of quarterly beats.

Foolish bottom line
It's an exciting time for InvenSense investors, particularly those who bought on the earnings dip. Taking a long-term view, it's clear that the growth in smartphones and the potential growth in wearable computing devices could be strong long-term revenue/earnings drivers.

However, rational or not, the performance of the stock exiting 2014 will probably be pretty heavily Apple-driven. If it wins the iPhone/iWatch sockets as expected and Apple has a series of blowout quarters, then InvenSense should power higher. If InvenSense doesn't win Apple, then it gets a bit trickier to call, but it would seem likely that the stock would drop rather significantly in that case.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple and InvenSense. The Motley Fool owns shares of Apple and InvenSense. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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