'Growth Is Not Dead Ahead Of 5G,' Longbow Says Of Skyworks Solutions

American semiconductor company Skyworks Solutions Inc. SWKS is a key supplier of radio frequency chips that are used in Apple, Inc. AAPL’s iPhones.

The Analyst

Longbow Research analyst Shawn Harrison maintained a Buy rating on Skyworks Solutions with a $126 price target.

The Thesis

The newly launched iPhones strongly counter the bear case that has surrounded Skyworks shares, Harrison said in a Wednesday note. (See the analyst's track record here.)

Skyworks anticipates a 10-percent rise annually in phone content driven by model launches ahead of the full 5G switch, the analyst said. 

The iPhone supplier does not consider 5G a step function, as the company pushed back against the bear thesis of limited growth until 5G, Harrison said.

“Management utilized the Sept. 12 launch of three new iPhones to highlight the adoption of three new LTE bands, 4x4 LTE MIMO, and 2x2 WiFI MIMO that it anticipates other OEMs will adopt in pre-5G models with upcoming launches.”

Skyworks anticipates a typical response from Apple products, as well as weak China shipments and overall stock softness, the analyst said

“SWKS expected China softness in its guidance, attributing weakness to the recent trend of smartphone OEMs avoiding the iPhone launch rather than any inventory correction that weak July and August MIIT data would imply.”

The need to diversify is understood, as Skyworks' valuation is depressed, Harrison said.

The acquisition of Averna Technologies provided unique audio technology and talented management, he said.

“With SWKS appearing to develop a BAW product in house, the focus of future M&A is a further push into IoT and connected car (up to $50 of RF content long term) capabilities principally leveraging RF and now, audio.”

Price Action

Skyworks Solutions shares were up 2.36 percent at $88.86 at the close Wednesday. 

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Photo courtesy of Skyworks Solutions.