Skyworks Solutions Faces Tough Market as Wireless Chip Demand Wanes
Skyworks Solutions, Inc. (SWKS), which has a market cap of $14.2 billion, is known for its high-performance analog and mixed-signal semiconductors that facilitate wireless connectivity. Headquartered in Irvine, California, the company caters to various sectors, including automotive, industrial, medical, and smartphones, distributing products worldwide.
Significant Underperformance in the Market
Over the past year, SWKS has struggled against the broader market. Its shares have decreased by 2.3%, while the S&P 500 Index ($SPX) has seen a gain of 35.9%. In 2024, the situation worsened, with SWKS shares declining 21.7% year-to-date, contrasting with SPX’s increase of 25.8%.
Focusing more closely on the semiconductor sector, SWKS also fell short of the SPDR S&P Semiconductor ETF’s (XSD) return of 32.1% over the past 52 weeks and an 8.8% gain year-to-date.
Q3 Earnings Result in Drop
Following its Q3 earnings release on July 30, Skyworks Solutions shares fell 3.5% due to revenues of $905.5 million, which marked a 15.5% year-over-year decline. This downturn stemmed from weak demand in the automotive sector, particularly affecting major clients like Tesla and Ford. Additionally, a reduction in content for the upcoming iPhone generation contributed to the revenue drop. Although Skyworks provided a more optimistic revenue outlook for Q4, investors remained concerned about the outlook for its mobile and automotive segments.
Mixed Analyst Opinions on Future Performance
For the fiscal year ending in September, analysts project a 31.5% year-over-year decline in EPS, bringing it to $5.21. Despite these challenges, Skyworks has a solid track record of exceeding earnings expectations, having beaten consensus estimates in the last four quarters.
The consensus rating among 24 analysts tracking the stock is “Hold.” This includes five “Strong Buy” ratings, 16 “Holds,” one “Moderate Sell,” and two “Strong Sells.”
Downgrade by Piper Sandler
On October 25, Piper Sandler adjusted its price target for SWKS down to $95 while maintaining a “Neutral” rating due to weaker performance in mobile-focused segments. The firm highlighted challenges associated with handset unit sales and slower growth compared to AI-driven semiconductor markets, which limits potential for immediate recovery.
The average price target of $111.82 suggests a 27.1% upside compared to SWKS’s current levels. However, the highest forecast reaches $140, indicating a possible increase of 59.1% from today’s prices.
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On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
