Skyworks Solutions Will Tank Alongside Apple

Apple (AAPL) suppliers like Skyworks Solutions (SWKS) have rallied strongly following the announcement that Apple is witnessing strong demand for its iPhone 7. In fact, the demand is reported to be so high that Apple is struggling to meet it.

Given the fact that Tim Cook is a supply chain genius, it seems odd that Apple is struggling with the supply and won’t reveal the first weekend sales number of the iPhone for the first time in its history. You can be sure that Apple would have released the numbers if they were good enough, but given that Apple is blaming supply as a reason seems a bit odd especially considering the fact that lines at Apple stores were noticeably shorter worldwide as compared to last year.

You could argue that people are shifting towards online sales, but that still won’t explain why Samsung had bigger lines at the launch of the Galaxy S7.
All in all, smartphone makers are running out of upgrades to make to their phones, which indicate that the smartphone market is near its peak.

Apple probably knows this and is buying more time by not releasing the first weekend sales number.
Skyworks Solutions Will Tank Alongside Apple
Image by matcuz / Pixabay
I find the recent Apple and Apple suppliers rally a bit of an overreaction and expect the stocks to come crashing down when Apple releases its quarterly earnings.

Skyworks Solutions in particular has appreciated more than Apple in the last few days. As someone who recommended Skyworks Solutions when it was trading at $28, I think the stock peaked a long time ago and it will struggle to stay over the $70 mark in the short term.

Despite Skyworks Solutions’ diversified business model, the market has always linked its performance with Apple, which is understandable since it generates a large portion of its sales from Apple. While the Apple-dependency was a boon two years ago, Skyworks Solutions will suffer considerably if sales of the iPhone 7 fail to impress the market, which, in my opinion, is very likely.

I have been bearish on Skyworks Solutions for almost a year now and the stock has fell almost 10% in the reference time period. However, going forward, I expect Skyworks Solutions to continue underperforming and would recommend investors to use the recent rally to exit the stock. Skyworks Solutions’ IoT potential may make it look attractive, but the stock is not trading at attractive levels given its saturated growth.

If the iPhone 7 fails as bad as I expect it to fail, Skyworks Solutions will tank, which is why I think the stock is a sell.
Published on Sep 23, 2016
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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