Mr. Market doesn't always make sense. I think he's off his meds again.
Here's why: Radio-chip designer Skyworks Solutions (Nasdaq: SWKS ) just updated its fourth-quarter guidance, and it was all good news. Sales should land at $420 million, at the top end of management guidance and right in line with Wall Street estimates. Earnings will come in at $0.52 per share, above both original guidance and analyst targets.
You might expect an update like that to boost the stock significantly. In Skyworks' case, the stock has underperformed the market in recent months. There weren't any hyper-inflated expectations to match.
But Skyworks crashed hard on the news. Shares plunged as much ass 17.7% by lunch.
Did Skyworks investors expect bigger sales on the back of Apple's (Nasdaq: AAPL ) iPhone 5 launch? After all, the device is off to yet another record-breaking start. Apple has included Skyworks radio processors in iPhones and iPads for a couple of years now. If Cupertino is selling tons of new iPhones, then Skyworks should reap direct benefits, right?
But that theory doesn't explain today's price action. If Skyworks was losing iPhone sales to rival chip makers, the market should reward those stocks as Skyworks falls. But RF Micro Devices (Nasdaq: RFMD ) is down 4.7%, TriQuint Semiconductor (Nasdaq: TQNT ) lost 4.5%, and Avago Technologies (Nasdaq: AVGO ) dropped 4.1%. In short, the whole radio-chip industry is suffering on the back of Skyworks' seemingly positive news.
Here's how I see this melodrama playing out over the next couple of weeks. First, iPhones ship out to consumers and tech analysts tomorrow. A few units get ripped apart and analyzed, finding the usual mix of Skyworks radios and competing chips inside. The company formally reports earnings at the end of October, and guidance for the coming period shows that Apple just didn't stockpile massive component supplies ahead of the iPhone launch. There's plenty of room for strong sales at the end of this calendar year.
And when it's all said and done, Skyworks has bounced back from this irrational drop. Nothing remains of today's panic, save for a black mark on the stock chart. This wouldn't be a bad time to invest in Skyworks if you've been thinking about it and just waited for the right moment.
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