Brean Capital Raises Skyworks Solution Price Target

Mike Burton of Brean Capital on Friday reiterated a Buy rating on Skyworks Solutions Inc SWKS with a price target raised to $92 from a previous $70 following the company's “solid” December results and increased March quarter guidance.

“The December quarter upside was predominantly driven by the Integrated Solutions segment as Apple's iPhone 6/6+ ramped,” Burton wrote. “Looking forward, we believe LTE growth in China and several new model ramps (Samsung Galaxy S6 amongst others to be unveiled in Barcelona) coupled with Skyworks Solutions less seasonal Broad Markets business is driving the better-than-seasonal guidance for the March quarter.”

Burton notes that the company's 38 percent sequential growth in its Integrated Solutions segment has peaked in the December quarter. As such, the analyst expects revenue from Apple to decline sequentially into the March quarter. In addition, China's business levels were roughly flat for the quarter but is expected to resume growth and drive the March quarter to the high end of normal seasonality.

Burton also adds that the company's all-time high operating margin of 35.1 percent was driven by its 46.7 percent gross margin, on its way towards achieving a 50 percent gross margin, given minimal increases in R&D spend as well as flat SG&A spend.

Finally, Burton states that handset inventories continue to be lean and that the company is struggling to keep up with demand as its Days of Inventory fell by five days at 58, which is 15 days lower than it was a year ago.