Analysts: Huawei Export Ban To Drag Skyworks In 2019, Beyond

Skyworks Solutions Inc SWKS lowered its fiscal third-quarter revenue guidance Tuesday, citing the impact from export restrictions imposed by the Commerce Department on Huawei.

The Analysts

KeyBanc Capital Markets analyst John Vinh maintained his Sector Weight rating on the shares of Skyworks.

Morgan Stanley analyst Craig Hettenbach maintained an Equal-weight rating but lowered the price target from $80 to $76.

Baird analyst Tristan Gerra maintained an Overweight rating but reduced the price target from $100 to $90.

D.A. Davidson analyst Thomas Diffely maintained a Buy rating and reduced the price target from $105 to $95.

KeyBanc Sees $65 Fair Value 

Huawei accounted for 12 percent of Skyworks' total revenue in the first six months of 2019, Vinh said in a Tuesday note.

While Skyworks lowered its third-quarter revenue guidance from a range of $815 million to $835 million to a range of $755 million to $775 million and third-quarter EPS guidance from $1.50 to $1.34, the company did not tamper with its 2020 guidance, the analyst said.

"We see fair value at $65, which is based on 10x our new FY20 EPS of $6.30." 

See also: Morgan Stanley Says Worst Of Smartphone Weakness Is Behind Skyworks

Morgan Stanley: Huawei Ban Creates Some Overhang

Despite the Huawei dynamic being largely priced in, uncertainty around the way forward with the important OEM creates a bit of overhang, Hettenbach said in a Wednesday note. 

Morgan Stanley sees a reasonably balanced risk-reward profile for Skyworks, and the recent stock weakness should provide the company opportunities to increase its $2-billion buyback, the analyst said. 

Morgan Stanley lowered its estimates through the December quarter and said the Huawei impact is likely to be greater in the September quarter.

"If the ban remains in place past that time, we would expect some of the lost business to be made up at other OEMs," Hettenbach said. 

DA Davidson De-Risks Forward Model

With the visibility into the exact duration of the Huawei ban remaining cloudy, D.A. Davidson prefers to adopt a worst-case scenario by taking Huawei completely out of its model through the end of next year, Diffely said in a Wednesday note. 

The sell-side firm reduced its EPS estimates by 40 cents for 2019 and by $1 for 2020.

The Price Action

Skyworks shares were down 2.6 percent at $67.60 at the time of publication Wednesday.

Related Link: Should You Buy The Skyworks Dip? Analysts Debate

Photo courtesy of Skyworks.