Buy Skyworks Solutions Irrespective of IPhone SalesSWKS) is mainly known for supplying RF chips to giant firms such as Apple, Samsung, as well as various other smartphone makers. Apart from the smartphone market, Skyworks Solutions’ product offerings are also used in broadband, home automation, military markets, automotive, etc. All these things together makes Skyworks Solutions a great long-term play, especially because of the prospects in the Internet of Things, or IoT, market.
Skyworks Solutions has been in a downtrend for over a year. However, it looks like the stock has reached a safe point as there are no looming negative catalysts that can have a severe impact on the company, at least for this year.
According to Cisco estimates, the total number of connected devices around the globe will reach 50 billion in 2020, a surge of 25 billion compared to the figure calculated in 2015.
This clearly suggests that the demand for the company’s analog chips could significantly increase over the coming few years.
Image by Republica / Pixabay
On the other hand, sales of Apple’s iPhone have been falling throughout the prior two quarters. Due to this, the company’s associated with the iPhone are also facing problems, and Skyworks is one of them. However, the company has ascertained itself as a significant supplier because it has surged revenue without losing profitability.
Skyworks Solutions’ management is well aware of the declining sales of the iPhone, and therefore seeking to decrease its reliance on Apple. The company is putting a lot of effort to become a significant player and grasp a huge portion of the IoT market. Most significantly, the company is reporting new design wins in several growth markets like smart homes, industrial GPS tracking, etc. with each passing quarter.
Despite the slowdown in the smartphone market, consensus still anticipates that the company’s earnings will escalate by approximately 17 percent during the upcoming five years. This shows that Skyworks Solutions in not completely reliant on Apple and will perform better irrespective of the slowdown in the smartphone market. Due to Skyworks Solutions’ diversified revenue stream, I think the stock is a good long-term play. With no negative catalyst in sight, the risk-to-reward ratio is very tempting for investors looking to buy the stock.
Published on Aug 30, 2016By Akshansh Gandhi