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Skyworks Slumps Despite Price Target Upgrades

Skyworks fell nearly 8% in trading Friday afternoon even after Wall Street raised price targets after a strong quarter.

Shares of Skyworks  (SWKS) - Get Skyworks Solutions Inc. Report were falling sharply Friday even after the chipmaker reported better-than-expected fiscal second-quarter earnings that sparked price target upgrades by analysts.

Shares of the Irvine, Calif., company fell 7.79% to $182.46 at last check.

For the quarter ended April 2, Skyworks nearly doubled its earnings to $325 million, or GAAP earnings of $1.95 a share and adjusted earnings of $2.37 per share. Revenue rose 53% to $1.17 billion. Analysts polled by FactSet were expecting GAAP earnings of $2.04 a share, or an adjusted $2.35 a share, on revenue of $1.15 billion.

For the third fiscal quarter, however, Skyworks guided for adjusted EPS of $2.13 a share versus consensus estimates of $2.14 a share, and revenue of $1.075 billion to $1.125 billion (midpoint of $1.1 billion) versus estimates of $1.0975 billion.

Skyworks, which specializes in radio-frequency chips that filter out interference for smartphones and other wireless devices, received price target upgrades from analysts at JPMorgan, Raymond James and Mizuho Securities.

JPMorgan analysts Bill Peterson, Harlan Sur and Peter K Peng raised the price target on Skyworks to $205 from $188.

"We continue to expect a reacceleration in the back half of the year as we expect the company to benefit from RF content gains at Apple and other smartphone customers as we move through the remainder of the year," JPMorgan, which has a neutral rating on the stock, wrote in a note.

"Skyworks continues to benefit from strong Wi-Fi demand and the company is poised to benefit from the Silicon Labs’ Infrastructure & Automotive (I&A) asset purchase later this year on strong EV [electric vehicle], data center and 5G infrastructure demand," JPMorgan analysts added.

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"We see the potential for multiple expansion should the company inorganically (or organically over time) diversify its revenue streams and/or increase its target shareholder returns in line with leading analog peers," JPMorgan added.

Raymond James analysts rate the stock outperform and raised their price target on Skyworks to $220 from $205. The firm is “very confident” to buy on weakness going into a seasonally stronger second half of the year.

The fact that the stock dropped on the report initially “suggests investors weren’t sufficiently impressed with guidance for what’s typically the seasonally weakest quarter, though that guidance was above consensus,” said Raymond James analysts.

Mizuho Securities, which has a buy rating on Skyworks, raised its price target to $210 from $207. The company is “well-positioned with a multi-year 5G ramp, iPhone content gains, strong China handset demand, IoT, and Broad Markets strength,” said Mizuho analysts.

Meanwhile, Oppenheimer analysts were more conservative, with the firm saying, "we remain sidelined for now as risk/reward appears balanced."

"We believe SWKS will continue to gain content and share in wireless devices and build on its strong systems-level position with smartphone OEMs. Expanding complexity of RF front end to 5G, suggests a sustained opportunity to continue increasing content," the firm added.

BMO Capital Markets said the gross margin outlook is “a bit lower than our estimate” given higher input costs, but “we would expect GM to start to creep back up as we head into a seasonally strong back half.”

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