Do Apple Risks Kill Skyworks Investors?

• The share price of Skyworks Solutions Inc SWKS has declined 32.32 percent over the past six months, to a low of $69.15 on January 6.
• B. Riley analysts have maintained a Buy rating on the company, with a price target of $127.
• The stock has dipped 11.3 percent over the past two days, which the analysts attributed to a large extent to concerns regarding another order cut by Apple Inc. AAPL.

According to the B. Riley report, an article on Japan’s Nikkei on January 6 suggested that Apple was reducing orders by 20 percent in January-March, “before normalizing in 2Q to digest excess inventory in multiples geos.”

The analysts believe that following the ramping into over 130 countries by the end of 4Q15, order moderation was possibly occurring, which was greater than had been anticipated by the Street and by suppliers.

However, the analysts also cautioned that the press reports “may overstate near term fundamental SWKS risk,” especially given that the article also mentioned that Apple had asked suppliers to keep supply flat quarter on quarter in 1Q.

The analysts also explained that if Skyworks Solutions had expected Apple to be flat quarter on quarter, the former company would have been much more bullish while discussing 1Q seasonality three months ago.

In addition, CES checks suggest that general expectations are closer to 4Q/1Q seasonality, instead of a sharp decline in business.

The report also highlighted that “content gain remains a solid tailwind and in 1Q16 SWKS should benefit from Mediatek’s 1Q16 Cat 6 product transition, new Samsung products, as well as seasonal Broad Market segment strength with secular IoT tailwinds.”