The ways that investors weight various facets of corporate earnings reports can be baffling at times. Consider the latest from silicon player Skyworks Solutions (NASDAQ:SWKS): Its guidance was slightly weaker than the market wanted, but it still expects fiscal 2019 to be another record-setting year, and its customers include major automakers and most smartphone companies, including its No. 1 client, Apple...oh, now you know why the share price sank, don't you?
In this segment from Motley Fool Money, host Chris Hill and senior analysts Jeff Fischer, David Kretzmann, and Jason Moser discuss how Skyworks' share-price moves have not reflected its business success over the past four years, and they consider where the company is headed.
A full transcript follows the video.
This video was recorded on Nov. 09, 2018.
Chris Hill: Skyworks Solutions, the maker of specialty semiconductors, having a rough week, as well. Fourth quarter revenue for Skyworks looked pretty good, Jeff. Guidance, though, was weak. Shares hitting a 52-week low on Friday.
Jeff Fischer: A little weak on the guidance, Chris, but they still expect 2019, which is just beginning now for them, to be a record year, and to be their tenth year in a row of record revenue and record EPS. What happened in the year that just ended? Revenue was up 6%, earnings per share up 12%, margins continued to grow. As I just said, it's a ninth year running of records. They have great customers in BMW, Tesla, and Toyota, let alone most smartphone makers in the world. Apple is their biggest customer by far. And that is probably right to the point of why the stock fell. Everyone's talking about Apple iPhone sales units topping out -- at least for now, maybe. That looks to be the case in Skyworks's guidance, as well, driving some of that flatness in revenue for the next quarter. That's the concern, along with China slowing, as well.
That said, the stock is inexpensive. It trades at 10X more or less expected earnings for the year ahead. That said again, it's been disappointing. Since 2014, shares haven't gone anywhere, even though business has executed superbly. This is one of the few semiconductor stocks that I really like. They have competitive advantages, growing margins, strong profits, great markets, including Internet of Things. They're in with all the major players as customers. I own shares. I continue to want to own shares. It just reminds you to be patient.
Hill: It's surprising that they put up record revenue every year, and the stock is basically flat since 2014.
Fischer: I think what happened is, a few years before 2014, the stock rose twofold or threefold, and then it's just flattened since then. But great management. We should be congratulating them. I look forward to their future. 5G is going to drive a lot more demand for their products, too.
Chris Hill has no position in any of the stocks mentioned. Jeff Fischer owns shares of AAPL and Skyworks Solutions. The Motley Fool owns shares of and recommends AAPL, Skyworks Solutions, and TSLA. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.