SWKS Declines 14% YTD: How Should Investors Play the Stock?
Skyworks’ SWKS shares have underperformed the Zacks Computer & Technology sector and its peers Qorvo QRVO and Broadcom AVGO on a year-to-date basis.
Skyworks’ shares have dropped 14%, while Broadcom’s shares have surged 54%. Qorvo’s shares have declined 9.7% year to date. The broader sector has appreciated 22.5% over the same timeframe.
The underperformance can be attributed to persistent challenges in broad markets and data centers due to elevated inventory levels amid ongoing recovery. Sluggishness in the wireless infrastructure and traditional data center markets and stiff competition are a headwind.
Despite the challenges, Skyworks is benefiting from its diversified portfolio, evidenced by design wins across infrastructure, automotive and emerging IoT sectors.
Skyworks Solutions, Inc. Price and Consensus
Skyworks Solutions, Inc. price-consensus-chart | Skyworks Solutions, Inc. Quote
Will SWKS Benefit From a Strong Portfolio?
Skyworks has a robust design win pipeline, particularly in the automotive and industrial sectors, while also witnessing improving demand in edge IoT markets. Its focus on next-generation technologies, such as Wi-Fi 7 and 5G, has also been noteworthy.
In June, SWKS showcased its latest Si82Fx gate driver solutions at PCIM Europe, highlighting its role in enhancing efficiency and reliability in AI data servers and electric vehicle charging applications alongside a range of other advanced isolation technologies.
Within the mobile segment, which contributed approximately 61% to total revenues in third-quarter 2024, Skyworks registered signs of inventory normalization and improved order patterns.
The company also highlighted that new AI features in smartphones could drive a multiyear upgrade cycle, leading to increased Radio Frequency complexity. This growing complexity emphasizes the need for advanced solutions, further positioning Skyworks as a leader in the market.
In third-quarter 2024, Skyworks secured 5G content for premium Android smartphones, including models like Google Pixel 8a, Oppo Reno12 and Samsung Galaxy M, which strengthens its footprint in the smartphone market.
Skyworks’ expanding clientele, which includes the like of Semtech SMTC, has been noteworthy.
Skyworks' collaboration with Semtech has been a key catalyst. The collaboration with Semtech, featuring the SKY66423-SX1261 design, has boosted low-power wide-area network solutions for industrial and smart city applications with improved efficiency and coverage.
SWKS Q4 Outlook Dull
Despite a strong portfolio, stiff competition and challenges in wireless infrastructure and traditional data center end-markets are expected to have hurt SWKS' top-line growth in fourth-quarter fiscal 2024.
As competitors like Qorvo prepare to capitalize on the increasing demand for smartphones, the intense competition is expected to drive pricing pressure in the market, further leading to a decline in margins.
For fourth-quarter fiscal 2024, the company currently expects revenues to be between $1 billion and $1.04 billion. Earnings are expected to be $1.52 per share at the mid-point of this revenue guidance.
The Zacks Consensus Estimate for fourth-quarter fiscal 2024 revenue is pegged at $1.02 million, indicating a 16.17% year-over-year decline. The consensus mark for earnings is pegged at $1.52 per share, unchanged in the past 30 days. The figure calls for a year-over-year decline of 30.91%.
Zacks Rank & Valuation
Skyworks' shares are cheap, as suggested by a Value Score of B.
The forward 12-month Price/Sales ratio for SWKS stands at 3.68, lower than the sector’s 6.12.
However, sluggish prospect makes SWKS a risky bet for growth-oriented investors, as suggested by a Growth Score of D.
SWKS currently has a Zacks Rank #3 (Hold), which suggests that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Skyworks Solutions, Inc. (SWKS) : Free Stock Analysis Report
Semtech Corporation (SMTC) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Qorvo, Inc. (QRVO) : Free Stock Analysis Report