RF Micro Devices, Inc. (RFMD), Apple Inc. (AAPL): The Market Hasn’t Recognized This Stock’s Potential Yet, but You Should

If consumers are getting an affordable, brand new device in a developing nation such as India, where an average consumer will have to save for eight months to buy the current iPhone 5 (based on monthly per capita income of around $95), then Apple can certainly expect to sell more as the iPhone will become a mass market commodity rather than a luxury.

I’m not going into the discussion regarding Apple Inc. (NASDAQ:AAPL)’s brand dilution in this case. RF Micro investors should be concerned with a higher number of shipments of chips, which would probably be the case if Apple does introduce a cheaper version of the device and RF Micro lands a spot in it (a possibility considering its strong outlook despite Samsung’s production cuts).

Beyond the big two

Management cites the importance of diversification, and RF Micro Devices, Inc. (NASDAQ:RFMD) indeed has a diversified customer base, as even Nokia Corporation (ADR) (NYSE:NOK) and BlackBerry Ltd (NASDAQ:BBRY) are also among its clients. Moreover, the company is also well-placed to benefit from growth in data connectivity. The company expects to benefit from the rollout of TD-LTE in China this year, as Chinese mobile major China Mobile Ltd. (ADR) (NYSE:CHL) prepares to deploy its 4G network.

RF Micro seems to have landed design wins in certain Chinese smartphone makers as well, and the company might also see revenue from Huawei and ZTE according to management’s commentary on the conference call. The Chinese smartphone market is rapidly growing and given the fact that RF Micro is witnessing solid growth at its Chinese clients, I see no reason why the company’s growth should stop.

The bottom line

What’s more, the stock trades at just 8.5 times forward earnings and earnings are expected to grow an impressive 30% in the next fiscal year according to analysts. So, RF Micro Devices is a company with a lot of potential, and the good thing is that it hasn’t run up too far. All this makes RF Micro a worthy investment if you’re looking for a company that will lead you to smartphone riches.