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Why Skyworks Is Tumbling Today

By Brian Feroldi – Nov 9, 2018 at 11:14AM

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Shares take a step back after management warns that its near-term growth rate is about to turn negative.

What happened

In response to management reporting fiscal fourth-quarter results and sharing weak guidance with investors, shares of Skyworks Solutions (SWKS 3.49%), a maker of specialty semiconductors, declined as much as 10% in early morning trading on Friday. Shares were down about 7% as of 10:55 a.m. EST.

So what

Here's a look at the headline numbers from the fiscal fourth quarter:

  • Revenue grew 2.4% to $1.008 billion, which was at the high end of guidance. It also was a smidge higher than what Wall Street was expecting.
  • Non-GAAP earnings per share increased 6% to $1.94. That number was $0.03 higher than guidance and the consensus estimate in the analyst community.

Here's an overview of the key numbers from the full fiscal year 2018:

  • Revenue increased 6% to $3.868 billion.
  • Non-GAAP EPS grew 12% to $7.22.

While these numbers compared favorably to expectations, management warned that weakness in the premium smartphone market and in China are going to weigh on its near-term results.

The guidance for the upcoming quarter helps to put that industrywide weakness on full display:

Metric Fiscal 2019 Q1 Guidance Fiscal 2018 Q1 Actual Implied Change (at Midpoint for Revenue)
Revenue $1.00 billion to $1.02 billion $1.052 billion (3.9%)
Non-GAAP EPS $1.91 $2.00 (4.5%)

Data source: Skyworks Solutions.

For context, Wall Street was expecting $1.07 billion in total revenue and $2.08 in EPS.

Person with smartphone in hand.

Image source: Getty Images.

Given the weak profit guidance and call for industrywide headwinds, it isn't surprising to see shares taking a hit today.

Now what

This won't be the first time Skyworks has had to deal with an industrywide slowdown. The smartphone market is mature, so it is understandable that the demand for the products will wax and wane from time to time.

On the plus side, on the call with investors, Skyworks CEO Liam Griffin stated that the company believes that 2019 will still be a good year:

Despite the near-term market weakness, we have a clear path to deliver our 10th consecutive year of revenue and earnings growth in fiscal 2019. This outlook is driven by sustained double-digit growth across our broad markets business, a powerful and expanding design win pipeline encompassing a wide range of customers and applications, world-class operational execution and scale and finally, our unwavering commitment to creating shareholder value.

Skyworks is currently trading for about 10 times full-year 2019 profit estimates and offers investors a dividend yield of 1.8%. If you're a value-seeking investor, right now might be a good time to give Skyworks stock a hard look.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skyworks Solutions. The Motley Fool has a disclosure policy.

Stocks Mentioned

Skyworks Solutions Stock Quote
Skyworks Solutions
$95.17 (3.49%) $3.21

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