Skyworks Analysts Call Out Apple Content Gain And Broad Market Strength Post Mixed 1Q

Needham analyst Rajvindra Gill maintained Skyworks Solutions Inc SWKS with a Buy and raised the price target from $110 to $140.

Skyworks reported "better than feared" F1Q23 results in light of tough prints from recent peers. The management expects a strong bounce-back based on known design wins. 

Smartphone-related weakness weighed on the company's results and guide. The analyst saw strength in the back half related to Broad Markets, Android, and continued Apple Inc AAPL execution.

Weakness in Android drove sequential declines in December as customers worked down inventory levels. Specifically, China remained low and under 5% of revenue, while Samsung Electronics Co, Ltd SSNLF didn't break the 10% level for CY22.

Mobile-related inventories moved higher, and Skyworks was no exception. Management is comfortable with higher inventory levels and has been proactively adjusting wafer starts and utilization for the past few quarters to prevent stuffing the channel.

The analyst believes that SWKS-related channel inventory is at better levels than competitors because management has intentionally held back shipments. The analyst expects inventory to be more normalized in C2H23.

Rosenblatt analyst Kevin Cassidy maintained a Buy and $160 price target. Skyworks turned in a roughly in-line quarter and slightly missed March quarter estimates. 

The analyst saw the company managing lead times, inventory, and factory utilization better than its peers during this demand downturn. 

Cassidy expects that this clean execution can allow the company to outperform the market as demand returns. The analyst is particularly interested in the company's Broad Market product line for adding longer-term diversified growth.

Oppenheimer analyst Rick Schafer maintained a Perform rating. SWKS reported mixed F1Q. Excess inventory continues to work through the channel. 

The analyst saw overall smartphone units down ~5% in 2023 (down >10% in' 22) as excess inventory lingers through C1H. 

SWKS's China exposure is <5%, setting up future opportunities. The analyst expects the GM to remain low 50%s given Apple's (68% of sales) exposure. 

Proven management, again out-executing through macro and smartphone headwinds. Diversification into Broad Markets played out. 

The company's exposure to the ex-growth handset market (65%) kept the analyst sidelined.

Price Action: SWKS shares traded higher by 8.78% at $118.88 on the last check Tuesday.

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