Skyworks Downgraded By Raymond James On Lack Of Upside Potential

Apple Inc. AAPL supplier Skyworks Solutions Inc SWKS does not exude much confidence in the near term, according to Raymond James. 

The Analyst

Analyst Chris Caso downgraded shares of Skyworks from Outperform to Market Perform.

The Thesis

Skyworks' year-over-year content growth is likely to exceed Street expectations, Caso said in a Friday note.

The analyst sees high-single-digit revenue growth in the second half of calendar 2018 as likely as opposed to the 1.2-percent growth implied by consensus estimates. 

Skyworks' guidance for the year is in line with its practice of issuing conservative, yet reasonable projections, the analyst said. 

A negative offset is likely relative to content growth, although it is already reflected in consensus estimates, Caso said. 

When details emerge, they could hurt sentiment and therefore won't serve as a positive catalyst to shares, the analyst said.

While noting that content gains can be lumpy, the analyst said content gains — and not unit growth — will propel growth over the long term, with opportunities in diversity receive modules and 5G.

Raymond James estimates $1 upside to fiscal 2019 consensus estimates if Skyworks can manage high-single digit revenue growth in the second-half of 2018. This could send the stock price to $120, Caso said. 

Raymond James also sees ZTE as a source of upside if the China trade situation ameliorates.

The Price Action

Skyworks shares have added over 5 percent year-to-date and were down 0.87 percent at the time of publication Friday. 

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