On Wednesday, Wolfe Research maintained its Peer Perform rating on shares of Skyworks Solutions (NASDAQ:SWKS), with a focus on the company's recent challenges in the handset market. The firm's neutral stance is attributed to Skyworks' loss of content in Apple (NASDAQ:AAPL)'s iPhone, which has overshadowed any potential cyclical improvements within the sector.
Skyworks Solutions experienced a 16% year-over-year decline in its handset business for the September quarter, reflecting the loss of content in what Wolfe Research believes are stable year-over-year iPhone unit sales. The firm expressed hope for an AI-driven upgrade cycle that could eventually benefit unit sales and improve Skyworks' revenue growth. However, the timing of this cycle is uncertain, and it remains to be seen whether it will occur this year or next.
The firm also anticipates that Skyworks will lose content to Qualcomm (NASDAQ:QCOM) as Apple (AAPL) begins to use its internal modem. This adds to the uncertainty of content gains in other areas. Wolfe Research suggests that Skyworks is likely to remain at approximately $5 earnings per share until a clear catalyst emerges to drive growth.
With the stock currently trading at around 17 times those earnings, Wolfe Research prefers to stay on the sidelines. The firm's analysis implies a cautious approach, waiting for a more definitive sign of improvement before changing its rating on Skyworks Solutions.
In other recent news, Skyworks Solutions reported strong fourth-quarter results for fiscal year 2024, with revenues of $1.025 billion, earnings per share of $1.55, and a notable free cash flow of $393 million. The company experienced a 21% sequential growth in mobile revenue and generated over $1.6 billion in free cash flow for the second consecutive year, marking a record free cash flow margin of 40%. Looking ahead, Skyworks Solutions anticipates Q1 FY2025 revenue to range from $1.05 billion to $1.08 billion, with a gross margin of 46%-47%.
Mizuho (NYSE:MFG) adjusted its outlook for Skyworks Solutions, reducing the price target to $105 from the previous $127, while maintaining an Outperform rating. Rosenblatt Securities also adjusted its outlook on Skyworks, reducing the price target to $120 from the previous $130 while maintaining a Buy rating.
Skyworks has been strategically investing in technology, focusing on AI, IoT, and Edge computing, to support long-term growth. Despite high inventory levels in networking infrastructure, automotive, and industrial sectors reportedly impacting performance, the company remains committed to long-term profitable growth and diversification. Skyworks' management is also concentrating on strategic partnerships with major players like Google (NASDAQ:GOOGL) and Samsung (KS:005930) in the Android market.
InvestingPro Insights
Recent InvestingPro data adds depth to Wolfe Research's analysis of Skyworks Solutions (NASDAQ:SWKS). The company's P/E ratio stands at 17.83, aligning closely with Wolfe Research's observation of the stock trading at around 17 times earnings. This valuation comes despite a challenging period for Skyworks, with revenue growth declining by 11.87% over the last twelve months.
Despite these headwinds, InvestingPro Tips highlight some positive aspects of Skyworks' financial health. The company has maintained dividend payments for 11 consecutive years and has even raised its dividend for 10 consecutive years. This commitment to shareholder returns is further emphasized by the current dividend yield of 3.22%, which may appeal to income-focused investors during this period of uncertainty.
Another InvestingPro Tip notes that 16 analysts have revised their earnings upwards for the upcoming period, suggesting some optimism about Skyworks' near-term prospects. This could be related to potential improvements in the handset market or other areas of Skyworks' business that may offset the challenges highlighted by Wolfe Research.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Skyworks Solutions, providing a broader perspective on the company's financial position and market outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.