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Shares of Apple Inc. (NASDAQ:AAPL) supplier Skyworks Solutions Inc (NASDAQ:SWKS) have tumbled about 20 percent since the iPhone maker reported quarterly results Nov. 1, but the company could find a reprieve, according to Morgan Stanley.
The Analyst
Analyst Craig Hettenbach upgraded Skyworks from Underweight to Equal-weight and maintained a $76 price target for shares.
The Thesis
Negative revisions for Skyworks have driven the consensus closer to Morgan Stanley's estimates, and have also led to meaningful underperformance in shares, Hettenbach said in the Wednesday upgrade note. (See his track record here.)
The negative estimate revisions came due to weakness in the Chinese smartphone market and recent order cuts in Apple's iPhone supply chain, the analyst said.
The sell-off has brought the shares close to trough multiples on an absolute and relative basis to the group, Hettenbach said.
Morgan Stanley was bearish on Skyworks for over two years due to concerns over gross margins; risks surrounding smartphone unit growth; and a lack of premium filter technology, the analyst said — a clear disadvantage relative to peers Broadcom Inc (NASDAQ:AVGO) and Qorvo Inc (NASDAQ:QRVO).
Morgan Stanley expects further estimate revisions into early 2019 due to disappointing iPhone sales. Yet the firm said it is using this period of "very negative sentiment" for smartphones and underperformance in shares to move to the sidelines.
"Our EPS estimate for FY19 is 2-percent below the Street, representing the smallest delta in the past two years," Hettenbach said.
The Price Action
Skyworks shares were down 0.21 percent at $70.53 at the time of publication Wednesday.
Related Links:
An Easy-To-Use Cheat Sheet For Apple Suppliers
Analyst: 5 Headwinds Facing Skyworks Solutions
Photo courtesy of Skyworks.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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