Market Overview

BMO Capital Markets: Skyworks Has More Than 25% Upside

Share:
BMO Capital Markets: Skyworks Has More Than 25% Upside
Related SWKS
Benzinga's Top Upgrades, Downgrades For November 12, 2018
85 Biggest Movers From Friday
Apple suppliers recover despite Qorvo guide cut (Seeking Alpha)

Skyworks Solutions Inc (NASDAQ: SWKS) reported better-than-expected fiscal 2018 first-quarter results Monday and issued upbeat guidance for the second quarter. The company announced a $1-billion stock buyback plan and raised its cash return targets.

The Analyst

BMO Capital Markets analyst Ambrish Srivastava upgraded Skyworks from Market Perform to Outperform and increased the price target from $100 to $120, suggesting roughly 27-percent upside.

The Thesis

Skyworks' ability to sustain a higher free cash flow-to-sales ratio; a higher commitment to capital allocation; a number reset in the nearer term; and an attractive valuation prompted the upgrade, Srivastava said in a Tuesday note.

BMO raised its fiscal 2018 and 2019 earnings per share estimates for Skyworks from $6.78 and $7.57, respectively, to $7.31 and $8.54. The lower revenue reset for 2018 was less than what Srivastava modeled, he said. 

BMO's estimates are now higher due to a combination of lower-than-expected tax rates for 2018 and 2019 and higher revenues, the analyst said. 

"While we have thought of Skyworks' operating model as more analog-like given its OM and trajectory of the FCF-sales ratio, we had struggled with the lack of follow-through on capital allocation," Srivastava said. 

Skyworks has tackled the issue by raising its capital allocation target from a prior 40-50 percent of the free cash flow to 60-75 percent, the analyst said. 

The valuation of Skyworks shares is attractive, according to BMO. 

The Price Action

Skyworks shares are down over 3 percent over the past year.

Shares were surging 11.14 percent to $105.23 after the open Tuesday. 

Related Links:

Rosenblatt Says Qualcomm RF efforts Could Become Headwind For Skyworks, Qorvo

5G Will Mean Plenty Of Blue Sky For Skyworks

Latest Ratings for SWKS

DateFirmActionFromTo
Nov 2018CitigroupDowngradesBuyNeutral
Nov 2018Charter EquityDowngradesBuyMarket Perform
Nov 2018Bank of AmericaDowngradesBuyNeutral

View More Analyst Ratings for SWKS
View the Latest Analyst Ratings

Posted-In: Ambrish Srivastava BMO Capital MarketsAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (SWKS)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ACBIKeefe Bruyette & WoodsUpgrades21.0
COTYBMO CapitalUpgrades12.0
ECCOppenheimerDowngrades0.0
VYGRRaymond JamesUpgrades0.0
ATNXJP MorganUpgrades15.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Credit Suisse Will Liquidate The XIV Short-Term Volatility ETN

Benzinga's Top Upgrades, Downgrades For February 6, 2018