Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

True to its name, Skyworks Solutions (NASDAQ:SWKS) is airborne today, rising more than 11% in morning trading. You can thank Goldman Sachs for that -- and R.W. BairdFBR, and BMO Capital as well. In fact, the one entity you can't credit for Skyworks stock's amazing performance today...is Skyworks itself.

Here's what you need to know.

Woman talking on phone showing thumbs up

Wall Street makes the right call: Despite its earnings miss, Skyworks gets the thumbs-up. Image source: Getty Images.

Skyworks reports

Let's tackle those in reverse order. Yesterday after close of trading, Skyworks reported its financial results for fiscal Q1 2019. The company said it earned $1.60 per diluted share in Q1, adding that on an adjusted basis, excluding certain items it considers "one-time," earnings would have been $1.83 per share.

Whether you take your earnings in the form of GAAP or pro forma, however, any way you cut it, Skyworks missed analysts' earnings estimate for the quarter. Wall Street was expecting the company to earn $1.84 per share. According to AP, the $972 million in sales that Skyworks reported also missed the consensus estimate of $975.1 million.

Topping it all off, Skyworks warned investors that fiscal Q2 earnings of $1.43 (pro forma) and sales of about $810 million will likewise fall short of analyst expectations for $1.52 per share in profit and nearly $857 million in sales.

In short: Rather than a "beat and raise" quarter, the company gave investors a "miss and lower."

Check out the latest Skyworks earnings call transcript.

Why Wall Street is just fine with that

And yet, Skyworks stock is up, not down on the news. Why?

Well, here's where Wall Street analysts arrive to save the day. Despite Skyworks' disappointing news, Goldman Sachs decided to upgrade the stock today, as reported by StreetInsider.com (subscription required). Calling a bottom on Skyworks (shares of which are down 27% in 12 months), Goldman predicted that the introduction of new "5G" cellphone networks and handsets in 2019 and 2020 will stabilize the company's business and allow the stock to resume growing. The analyst also likes its BAW (bulk acoustic wave) communications technology.

Between these two advantages, Goldman believes investors will soon begin awarding Skyworks higher multiples to earnings as the 5G movement gains steam. Aiming to get ahead of the curve, Goldman upgraded Skyworks stock to buy and assigned the shares a $96 price target.

And not just Goldman Sachs

Nor is Goldman the only analyst willing to overlook Skyworks' weak quarter today. As TheFly.com points out, both B. Riley FBR and BMO Capital raised their price targets on Skyworks stock this morning (both to $94). FBR noted that Skyworks' profits were "solid" even if they missed estimates, and praised management's decision to begin buying back $2 billion worth of shares as a demonstration of confidence in the future. BMO echoed the sentiment on the buyback, and predicted the company will be able to sustain a free cash flow margin of 30% -- i.e., generate $0.30 in real cash profit on every $1 in sales.

R.W. Baird even went a step further, adding Skyworks to its "Fresh Pick" list of stocks expected to outperform the market, and saying Skyworks' valuation looks compelling at current levels.

Valuing Skyworks

I cannot disagree. At $13.2 billion in market cap, with no debt on its books and $1.1 billion in the bank (according to S&P Global Market Intelligence), Skyworks Solutions has a debt-adjusted market capitalization, or enterprise value, of just $12.1 billion. Weighed against that, the company's $1.1 billion in trailing GAAP earnings -- or even its free cash flow of just $925 million -- compare favorably to analysts' expectations for future growth.

In fact, working off those numbers, we find that Skyworks' debt-adjusted P/E is only 11 today, while its enterprise value/FCF ratio is only a little bit higher -- 13.1 Either multiple, it seems to me, compares quite favorably to analysts' expected 15% long-term growth rate.

Whether you believe the "5G revolution" will arrive as early as this year -- or 2020, as Goldman Sachs believes -- or not, the valuation on Skyworks stock simply looks too compelling to ignore. Wall Street is right on this one:

Skyworks is a buy.