A 3.8% jump in Tuesday’s session was enough to make semiconductor
Skyworks (NASDAQ: SKWS) among the best-performing stocks on the NASDAQ. It came after last week’s 10% dip that put shares back towards the low of the tight range they’ve been trading in since the end of July.
They’ve been consolidating after a breathless run from the lows of March, which saw them rally as much as 130%. This means they’re finally above and beyond the sticky $110-120 level which was where they topped out in 2015, 2017, 2018, and early 2020. From both a fundamental and technical perspective, it looks like the stars are starting to align and Skyworks is ready to break out north of the current range as well.
5G Rollout
As one of Samsungs and Apple’s (NASDAQ: AAPL) suppliers, Skyworks’ shares will always have a decent bit of exposure and correlation to the whims and fancies of their fortunes. With the ongoing rollout of the new 5G generation phones, that’s a good thing. The hype around 5G has been a major driver in the price of any stock related to it in the past few years, which has only increased as the full-scale rollout kicks off. Indeed, it’s been all that the sell-side firms can think about in recent weeks as they’ve upgraded the likes of Skyworks and raised price targets.
Needham raised their price target on the stock from $170 to $200 last month, citing strong growth in both Apple’s and Samsung’s products which underlined the strong demand forecasted for their 5G phones. KeyBanc and B. Riley also raised their price target on the back of estimates that 5G device penetration will grow at a 60% CAGR through 2023.
The previous month, Rosenblatt was out saying they believe Skyworks could achieve "above semiconductor industry revenue growth of 10% over the next two years." In a note to clients, analyst Kevin Cassidy added; "the company can leverage its multiple generations of cellular RF technology leadership and smartphone OEM relationship to expand its customer base. The increasing RF front-end design complexity will continue the company’s long-term margin expansion, in our view."
Around the same time, JPMorgan reiterated their bullish stance "on quality names that can benefit from the iPhone 12 cycle", with particular focus on Skyworks, Qorvo (NASDAQ: QRVO), and Qualcomm (NASDAQ: QCOM).
Getting Involved
For investors thinking about getting involved it’s important to note that of these three names, Skyworks is the laggard. Since the start of the year, their shares have posted a 18% gain, while Qorvo is at 37% and Qualcomm at 67%. But perhaps there’s a contrarian opportunity at hand, one where the overlooked stock can play aggressive catchup.
They’re still posting double-digit percentage revenue growth year over year as November’s Q4 earnings report showed us. That beat on both the topline and bottom-line estimates in a quarter where management continued their massive stock repurchase program around the $140 levels, signaling to investors that they think the stock is undervalued there.
Investors getting involved this side of 2021 has a nice upward trend to support an entry and they’ll be looking forward to a potential upside surprise at the next earnings report. The street’s estimate right now is for EPS of $1.80 and revenue at $840m. However, Skyworks’ CFO Kris Sennesael has already hinted that they’re going to plow through those numbers. As part of November’s earnings report he spoke positively on the 5G potential and increasing demand for their core products. He added; “specifically, in the first fiscal quarter of 2021, we anticipate revenue to be between $1.04b - $1,07b with non-GAAP diluted EPS of $2.06 at the midpoint of our range.”
Oh, and did we mention that they also pay a dividend yield of 1.38%?
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