What happened

Shares of connectivity chip designer Skyworks Solutions (NASDAQ:SWKS) were down just over 4% on Friday. The company's final report card from its fiscal year 2021 (the 12 months ended Oct. 1) was in line with what Wall Street analysts were expecting. Revenue was up 37% year over year to $1.31 billion in the last quarter, and was up 52% to $5.11 billion for full-year 2021.  

Adjusted earnings per share were up 42% in the last quarter to $2.62, and were up 71% to $10.50 for the full year.  

Four teenagers sitting outside using smartphones.

Image source: Getty Images.

So what

Given the solid quarterly update, what gives with the market's lackluster response? There is lingering doubt whether Skyworks' sales boom last year is going to stick. For one thing, there were probably catch-up orders taking place this time a year ago after initial pandemic lockdowns gave way to a boom in electronic device sales -- including new 5G smartphone models. Then, as 2021 got underway, a global shortage of chips boosted sales further as Skyworks' manufacturing partners have been working overtime to crank out semiconductors.  

So it's the guidance that has some investors feeling "meh" about the stock. At the midpoint of guidance, first-quarter fiscal 2022 revenue of $1.5 billion represents a 14% sequential increase, but is essentially flat with where sales were in first-quarter fiscal 2021. And this of course includes a small revenue bump from Skyworks' recent acquisition of Silicon Labs' (NASDAQ:SLAB) automotive and infrastructure business.

Now what

Semiconductor businesses are cyclical, and it's normal for sales to ebb and flow over time. Though it may appear Skyworks' momentum is stalling out at the moment, the company is lapping a particularly strong showing last year when smartphone sales were coming back with a vengeance.

For a company like Skyworks, then, it's important to stay focused on the long term. Revenue and profitability continue to trend higher, and with global 5G carrier subscriptions expected to balloon from about 580 million users today to over 3 billion by 2025, there are still plenty of next-gen phones with Skyworks' circuitry in them that will be sold in the coming years. That's not including Skyworks' other markets addressing devices with Bluetooth and Wi-Fi connectivity, which are also growing and now represent nearly one-third of the total business.

After the latest update, Skyworks stock trades for 24 times trailing-12-month free cash flow. If you want in on the multiyear upgrade to 5G, this could be a compelling long-term value.

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.