Why Skyworks Solutions, Inc. Shares Surged Again

Is this meaningful? Or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Jul 18, 2014 at 12:40PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of analog chip technologist Skyworks Solutions Inc (NASDAQ:SWKS) soared 12% on Friday after its quarterly results and outlook impressed Wall Street.

So what: Skyworks shares have soared over the past year on a string of blowout quarters, and Thursday's Q3 results -- non-GAAP EPS spiked 54% on sales growth of 35% -- coupled with upbeat guidance only reinforce that trend. In fact, Skyworks generated about $200 million in operating cash flow while non-GAAP operating margin increased 480 basis points year-over-year to 30.5%, suggesting that its competitive position continues to strengthen rapidly as well.

Now what: Management now sees Q4 adjusted EPS of about $1.00 on revenue of $680 million, well ahead of the consensus of $0.87 and $608 million. "Quite simply, we are capitalizing on the macro trend to connect virtually everyone and everything, all the time," said Chairman and Chief Executive Officer David Aldrich. "Our high performance analog solutions and system-level integration capabilities coupled with our operational agility and scalability are enabling us to connect the previously unconnected. Accordingly, Skyworks is setting the pace for analog semiconductor industry growth in terms of both revenue and value creation." When you couple that upbeat outlook with Skyworks' still-attractive PEG of 0.9, the red-hot shares might even have more room to run.