Please ensure Javascript is enabled for purposes of website accessibility

Why Did Skyworks Rise 26% in the First Half of 2021?

By Ryan Downie - Jul 13, 2021 at 3:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Strong sales and earnings from 5G adoption are sending this semiconductor stock higher.

What happened

Shares of Skyworks Solutions (SWKS -0.76%) rose 26% in the first half of the year, according to data provided by S&P Global Market Intelligence, after two strong earnings reports and positive momentum around semiconductor stocks. The company's revenue rose 61% and earnings per share increased 96% over the first six months of its fiscal year. However, the stock experienced significant volatility along the way.

SWKS Total Return Level Chart

SWKS Total Return Level data by YCharts

So what

It's been a bumpy ride for Skyworks in 2021. The stock climbed nearly 20% after its fiscal first-quarter earnings report smashed analyst estimates. Skyworks is one of the leading semiconductor providers for 5G enabled devices, and the rollout of next-generation phones is fueling demand for its products. These gains were short-lived, though, as a global chip shortage weighed on the entire semiconductor industry in Q1.

Person using mobile phone for video chat.

Image source: Getty Images.

Skyworks again beat analyst estimates in its second fiscal quarter, but the stock tumbled following its April 29 report. It seems that many growth investors were anticipating even better results following stellar iPhone sales by Apple, which accounts for roughly half of Skyworks' sales.

The stock closed out the quarter on a strong note, as analysts at major banks published bullish notes on Skyworks and other Apple suppliers. These improved expectations were based on reports that iPhone sales were exceeding previous expectations.

Now what

Skyworks is certainly in a position to deliver strong growth, with catalysts including 5G adoption, connected automobile proliferation, and the Internet of Things. There's a lot of opportunity for growth, but the stock will also be prone to volatility.

The stock pays a 1% dividend yield, which is low for income investors.
Its valuation ratios aren't extremely expensive, but they are on the high end of the stock's historical range. This would suggest that there's more risk to the downside than potential for upside. On the other hand, Skyworks has been notching wonderful financial results, and the stock could easily ride that momentum higher. If it continues to deliver high growth rates, returns should be excellent for shareholders.

Ultimately, investors should expect continued volatility. Skyworks presents a wonderful opportunity, but it would be vulnerable if it fails to meet analyst expectations in the upcoming quarters.

 

Ryan Downie owns shares of Skyworks Solutions. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Skyworks Solutions and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Skyworks Solutions, Inc. Stock Quote
Skyworks Solutions, Inc.
SWKS
$112.66 (-0.76%) $0.86
Apple Inc. Stock Quote
Apple Inc.
AAPL
$165.35 (-0.14%) $0.23
iShares Trust - iShares PHLX Semiconductor ETF Stock Quote
iShares Trust - iShares PHLX Semiconductor ETF
SOXX
$419.20 (-0.78%) $-3.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.