Major Catalysts for This
Earnings on Thursday, April 29.....
Skyworks Solutions has already set a high bar for the second quarter of
fiscal 2021. The company expects to deliver $2.34 per share in adjusted
earnings on revenue between $1.125 billion and $1.175 billion. Skyworks' revenue
would increase 50% year over year at the midpoint of the guidance range, while
adjusted earnings are on track to spike an impressive 75%.
Skyworks Solutions could surpass its expectations and deliver stronger Q2
numbers. Apple -- Skyworks' largest customer, which produced 56% of its sales
last fiscal year -- is one reason why that may be the case. Skyworks is
supplying multiple radio-frequency chips for use in the iPhone 12 lineup, and
that's going to create a massive tailwind for the company given the popularity
of Apple's new phones.
For the last reported quarter, it was expected that Skyworks would post
earnings of $2.08 per share when it actually produced earnings of $3.36,
delivering a surprise of +61.54%.
Over the last four quarters, the company has beaten consensus EPS estimates
The iPhone 12 models have been setting the sales chart on fire ever since they
were launched late last year, encouraging Apple to raise production. Supply
chain checks indicate that Apple could have made around 60 million iPhones in
the first quarter of 2021, driven by a sales "supercycle." Strategy
Analytics estimates that Apple sold 57 million iPhones last quarter, an
increase of 44% over the prior-year period.
A jump in iPhone sales volumes, and the fact that Skyworks should be getting
more revenue from each unit of Apple's new devices thanks to the higher cost of
components of 5G smartphones, should pave the way for revenue and earnings
Skyworks' revenue from the non-mobile business (formally known as the broad
markets segment) spiked 35% year over year in the first quarter. Though this
segment accounts for 22% of the company's total revenue, it is showing signs of
moving the needle in a bigger way in the long run. That's because the broad
markets business stands to gain from a fast-growing technology trend in the
form of the Internet of Things.
Skyworks is targeting wireless connectivity applications such as Wi-Fi 6
devices, automotive, healthcare, and audio solutions, among others. The company
has found success in these areas as the rapid growth of the broad markets
business shows us. It has also built a wide customer base including the likes
of Cisco Systems, Netgear, Alphabet's Fitbit, Volkswagen, and Toyota, to name a
Wall Street expects Skyworks to deliver third-quarter revenue of $1.07
billion and adjusted earnings of $2.10 per share. That would translate into 45%
year-over-year sales growth and a 68% rise in adjusted earnings. This is
already impressive, but Skyworks can deliver better guidance considering the
developments that are reportedly taking place at its largest customer.
Apple supplier Taiwan Semiconductor Manufacturing is reportedly planning
to start the production of the chip that will go into this year's iPhone lineup
next month. For comparison, the iPhone 12's A14 chip hit the production lines
in June last year. Additionally, Apple is expected to produce 25% more units of
this year's iPhone models as compared to 80 million units of the iPhone 12
produced in 2020.
If true, such a development could pave the way for strong guidance from
Skyworks for the rest of the year. Analysts expect the chipmaker to end the
fiscal year with 46% revenue growth and a 67% jump in earnings, and the
sustained success of its largest customer in the 5G smartphone market could
make that possible.
Acquisition of Silicon Labs.....
Liam Griffin, president and CEO of Skyworks Solutions announced Friday
the acquisition of the infrastructure and automotive business of Silicon Labs (SLAB)
for $2.75 billion.
pleased to welcome the Infrastructure & Automotive team to Skyworks when
this transaction is completed. This acquisition will broadly expand our
capabilities across high-growth end markets including automotive,
communications and industrial, creating new and highly compelling opportunities
Griffin called the announcement a "perfect deal" that gives
Skyworks great technologies that they wanted in a transaction that's
immediately accretive to their earnings. He said it gives Skyworks access to
markets they wanted to be in, including autos and the data center.
leveraging our global sales channels, operational scale and deep customer
relationships, Skyworks is well positioned to drive above-market growth, while
diversifying revenues, expanding margins and delivering strong returns in
earnings and cash generation,” Griffin added.
Unlike most acquisitions that include a lot of cost cutting synergies,
Griffin noted that with this deal, they'll be investing and bringing all of the
Skyworks' resources to grow these segments. He said he can't wait to bring 385
really smart people into the Skyworks family.
The acquisition is expected to be immediately accretive to SWKS and is
anticipated to close in the third quarter of this year. SWKS believes that
Silicon Labs’ technology portfolios and related assets will be “highly
complementary” to its connectivity portfolio.
With this acquisition, SWKS also expects to expand rapidly into different
business segments including electric and hybrid vehicles, 5G wireless
infrastructure, power supply, industrial and motor control, and optical data
communication. This acquisition will enable SWKS to provide products to a
market worth $20 billion annually.
Raymond James and BMO note that the deal will immediately add to
Raymond James said the deal "isn't inexpensive" while BMO said
Skyworks is paying "a reasonable multiple." Both rate Skyworks
Morgan Stanley, with a more conservative equal-weight rating on the
stock, said the deal should be a positive for both companies.
7. Analyst Positivity.....
Solutions had its price objective boosted by research analysts at B. Riley from
$225.00 to $230.00 in a research report issued on Friday. The brokerage
currently has a “buy” rating on the semiconductor manufacturer’s stock. B.
Riley’s price objective would indicate a potential upside of 25.40% from the
company’s current price.
Skyworks Solutions had its price objective lifted by Mizuho from $195.00 to
$207.00 in a report released last Thursday morning. They currently have a buy
rating on the semiconductor manufacturer’s stock.
research analysts also recently weighed in on the company.....
boosted their target price on Skyworks Solutions from $160.00 to $190.00 and
gave the stock a “neutral” rating in a research note on Friday, January 29th.
They noted that the move was a valuation call.
& Company LLC boosted their target price on Skyworks Solutions from $200.00
to $245.00 and gave the stock a “buy” rating in a research note on Friday,
consensus among Wall Street analysts is a Moderate Buy based on 12 Buys and 7
Holds. The average analyst price target of $208.25 implies upside potential of
about 13.5% to current levels.