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Brean Capital: We Still Like Skyworks; Apple, Chinese Carriers Should Drive Demand For Its Products

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Despite weakening post-Chinese New Year demand for Chinese OEMs, analysts at Brean Capital remain bullish on Skyworks Solutions Inc (NASDAQ: SWKS).

In a new report, analysts updated their positive outlook for the stock.

Success Despite Weakening Demand

Analysts believe that the recent weakness in the overall Chinese OEM segment that has come about largely in part to the strong U.S. dollar hurting demand in emerging market economies will not hold Skyworks down.

Analysts are expecting Apple Inc. (NASDAQ: AAPL) demand to exceed expectations in Q1, and they also believe that Skyworks' content in the Samsung Electronics Co Ltd (OTC: SSNLF) GS6 will be higher than initially predicted.

Related Link: These Analysts Spoke With Chinese Handset Suppliers...And Found 3 Things

Strong RF TAM Growth

Analysts expect the recent LTE transition in China to accelerate as its LTE infrastructure rollout continues.

Analysts see long-term demand resulting from China Unicom Ltd (NYSE: CHU) and China Telecom Corp Ltd (NYSE: CHA)'s recently-granted FDD-LTE licenses that will likely drive China Mobile Ltd (NYSE: CHL) to improve its infrastructure as well.

Potential M&A Catalysts

Analysts believe that Skyworks could look to bolster its analog portfolio through targeted acquisitions, and mention the excitement in the space surrounding recent M&A activity at Qorvo Inc (NASDAQ: QRVO) and Avago Technologies Ltd (NASDAQ: AVGO).

Analysts point out that Skyworks trades at a discount to other names in the analog group despite its better margins and growth, its unlevered balance sheet and its $1 billion-plus in net cash.

Outlook

Even though Skyworks' stock is already up 33 percent in 2015, analysts raised their projected multiple and price target for Skyworks based on prospects for above-average growth. Brean now has a Buy rating on Skyworks and a $110 target for the stock.

Latest Ratings for SWKS

DateFirmActionFromTo
Jan 2017Goldman SachsDowngradesBuyNeutral
Oct 2016JP MorganInitiates Coverage OnNeutral
Oct 2016JP MorganInitiates Coverage OnNeutral

View More Analyst Ratings for SWKS
View the Latest Analyst Ratings

Posted-In: Brean Capital Chinese OEMs Chinese RF TamAnalyst Color Long Ideas Price Target Analyst Ratings Trading Ideas

 

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