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

Despite weakening post-Chinese New Year demand for Chinese OEMs, analysts at Brean Capital remain bullish on Skyworks Solutions Inc 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. AAPL demand to exceed expectations in Q1, and they also believe that Skyworks' content in the Samsung Electronics Co Ltd SSNLF GS6 will be higher than initially predicted.

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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 CHU and China Telecom Corp Ltd CHA's recently-granted FDD-LTE licenses that will likely drive China Mobile Ltd 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 QRVO and Avago Technologies Ltd 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.