What happened

Shares of Skyworks Solutions (SWKS 1.84%), a maker of specialty semiconductors used in smartphones, slipped Thursday morning after investment bank UBS (UBS -0.07%) cut its price target on the stock by 17%.

As of 10:05 a.m. ET today, shares of Skyworks were down 2.1%.

So what

The UBS price target cut came in the wake of Apple unveiling a new iPhone 14 that does not feature Wi-Fi 6E (a faster form of Wi-Fi). In a note separate from UBS, investment bank KeyBanc observed that analysts had hoped Wi-Fi 6E would be integrated into the iPhone 14, because this would have implied a meaningful increase in Skyworks content in the Apple device, TheFly reported. The absence of Wi-Fi 6E from iPhone is a negative for Skyworks because it means slower growth in the near term.  

While not specifically addressing the Wi-Fi issue, UBS noted that it downgraded its price target on the stock primarily out of fears that consumer demand for cellphones looks weaker this year.

Now what

Although UBS cut its price target, it left its overall rating on the stock at neutral. And even its price target of only $110 still implies nearly 13% upside from Skyworks' current share price of $97 and change. So is this really such bad news for Skyworks shareholders?

Not necessarily. Analyst misgivings notwithstanding, Skyworks stock appears fairly priced at just 12.2 times earnings, with a respectable 2.5% dividend yield and a projected 10.4% long-term growth rate. When viewed in terms of its total return ratio, that gives the stock a score of 0.95. (Hint: Anything under 1.0 is generally considered "cheap," and the lower the ratio, the better).

My main concern on Skyworks is that, with trailing free cash flow of only $976 million, it currently generates only about $0.75 in real cash profits for each $1 of net profit it says it earns. Arguably, that makes the stock about 25% more expensive than its P/E ratio suggests.

If you're looking for a reason to sell Skyworks today, I'd focus less on which analysts are changing their opinions, and more on Skyworks' questionable valuation.