We came across a bullish thesis on Skyworks Solutions, Inc. (SWKS) on Substack by Tyler Moody. In this article, we will summarize the bulls’ thesis on SWKS. Skyworks Solutions, Inc. (SWKS)’s share was trading at $57.80 as of April 22nd. SWKS’s trailing and forward P/E were 17.78 and 12.44 respectively according to Yahoo Finance.
A technician soldering a semiconductor chip, emphasizing the power of the company’s products.
Skyworks Solutions (SWKS), a leading analog and mixed-signal semiconductor company, surfaced as an interesting candidate on a high free cash flow screen. Known for its RF chips that power wireless connectivity in smartphones and other electronics, Skyworks is a crucial supplier to Apple, which accounts for a significant portion of its revenue. However, the company has been actively working to diversify beyond mobile since its notable acquisition in 2021. Despite cyclical headwinds, including an expected mid-teens decline in mobile revenue next quarter due to seasonal patterns, Skyworks remains financially sound. Its most recent quarter showed a 4% sequential sales increase, though revenue remains down 11% year-over-year, and its trailing twelve-month revenue has slipped from a 2022 peak of $5.5 billion to about $4 billion. Still, the company maintains a healthy balance sheet with $1.75 billion in cash against $995 million in debt and has announced a new $2 billion share repurchase program along with a steady $0.70 quarterly dividend. Long-term growth has been erratic, averaging just 2.5% over the last decade, though a more optimistic 5% assumption may be reasonable moving forward. Using Bruce Greenwald’s valuation framework, normalized NOPAT is estimated at $1.072 billion based on historical margins and revenue trends. With a market cap of $8.6 billion, this implies a compelling 12.4% earnings yield. Combined with a 5% growth assumption, the stock could offer a 17.4% annual return—potentially outperforming broader market expectations. However, a key risk remains its revenue concentration with Apple, which investors should factor in before committing to a long-term thesis. While a deeper dive is needed to refine the valuation, SWKS appears to be nearing an attractive entry point, offering a compelling balance of free cash flow strength, capital return programs, and optionality through business diversification.
Skyworks Solutions, Inc. (SWKS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held SWKS at the end of the fourth quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of SWKS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SWKS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.