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Why Skyworks Solutions Stock Popped This Morning

By Rich Smith - Dec 15, 2020 at 10:59AM

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Two Wall Street banks speak in support of the stock.

What happened

Skyworks Solutions ( SWKS 2.06% ) stock is up 4.7% as of 10:30 a.m. EST after the maker of semiconductors for cellphones received a pair of unrelated price target hikes yesterday.

So what

Early in the morning, Morgan Stanley upped its price target on Skyworks to $155, reports Several hours later, reported an even more ambitious target price hike from Goldman Sachs -- to $171. MS rated the stock equal weight, while GS maintained a buy rating on the shares.

Stock up glowing green arrow climbs on a stock screen

Image source: Getty Images.

Now what

And that's really about all we know about the analyst moves. Neither news outlet has much in the way of detail explaining the respective analysts' thinking about Skyworks, aside from the fact that, generally speaking, Goldman Sachs is optimistic about the economy improving in 2021, and has noticed that "market multiples" on stocks seem to be expanding. But here's what we do know about Skyworks specifically:

Valued at 29 times trailing earnings, and 29 times free cash flow as well, Skyworks is not a cheap stock. Even assuming analysts are correct about the company's prospects, the consensus on Wall Street (according to S&P Global Market Intelligence data) is that Skyworks might generate about 10% earnings growth over the next five years, which results in a PEG ratio of about 2.9 on the stock.

Even in a market where investors seem happy to overpay for most stocks, Skyworks' valuation seems excessive -- and the stock looks like more of a sell than a buy to me.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Skyworks Solutions, Inc. Stock Quote
Skyworks Solutions, Inc.
$152.49 (2.06%) $3.08

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