KeyBanc: Skyworks Sends Positive Messages On Next iPhone Ramp

Skyworks Solutions Inc SWKS issued a fiscal third-quarter report Thursday that solidifies the case for the semiconductor stock, according to KeyBanc Capital Markets.

The Analyst

Analyst John Vinh maintained an Overweight rating on Skyworks with an unchanged $120 price target.

The Thesis

Skyworks suggested in its earnings report and conference call that it's in the early stages of a new iPhone ramp, and Apple Inc. AAPL is looking for its content to increase by as much as 25 to 30 percent, Vinh said in a research report. (See the analyst's track record here.)

The Apple supplier indicated it has good visibility into the new iPhone cycle, and 2018's activity should return to "normal" in contrast to last year's iPhone X delays, the analyst said.

Encouragingly, Skyworks' increased iPhone-related activity should be enough to offset declines in China, a market which is merely expected to be "OK" in the fiscal fourth quarter, Vinh said.

Although the ban on China's ZTE was lifted, it will take some time for Skyworks to return to prior levels, and the company will see a "modest" recovery at ZTE, the analyst said.

Q4 revenue guidance came in better than expected, including upside in EPS, revenue and gross margin, Vinh said.