Skyworks Solutions Analysts Prefer Qorvo Due To More Pronounced Content Gains In iPhone, Robust Presence In China

Needham analyst N. Quinn Bolton reiterated a Hold rating on Skyworks Solutions, Inc SWKS.

Though Skyworks reported 3Q results at or above the midpoint of guidance and guided 4Q23 in line with expectations, he believes Skyworks' operating results will underperform those of its closest peer, Qorvo, Inc QRVO, over the next several quarters. 

Bolton writes that SKWS' content is at best flat, and likely down modestly, generation to generation in the Apple Inc AAPL iPhone 15.

Though he expects Android and Broad Markets revenue will trough in the second half of CY23, he believes there are better ways to play a recovery in Android shipments.

The analyst expects a slow recovery in adjusted gross margin and a reset in operating expenses in FY24 will result in only modest Y/Y growth in FY24 adjusted gross margin.

Rosenblatt analyst Kevin Cassidy reiterated Skyworks with a Buy and a $150 price target. Skyworks delivered a near spot-on June quarter report and September quarter guide. 

Based on the September guide, the company at least maintained its iPhone market share. Management also discussed various Android handset wins and Automotive, Data Centers, and Telecom. 

Like peers, lackluster demand is dragging the Android and IoT inventory correction out for another two quarters. He sees Skyworks management as navigating underutilization, internal inventory, and any company in his coverage.

Raymond James analyst Srini Pajjuri maintained a Market Perform rating.

SWKS's 3Q revenue was in line, while EPS was slightly better on lower opex. 

The 4Q revenue and gross margin outlooks are mainly in line with consensus. SWKS benefits from relatively stable iPhone 14 demand and seasonal iPhone 15 builds. On the other hand, content gains in the iPhone 15 appear modest, and inventory headwinds persist in Android. 

The Broad Markets segment remains sluggish despite pockets of strength in Auto and Data Centers. Looking ahead, Pajjuri expects SWKS to benefit from an eventual recovery in Android and secular growth in Auto/IoT markets. Gross margins should recover over time as factory utilization improves. 

However, Pajjuri sees limited near-term catalysts and prefers Qorvo due to its more pronounced content gains in iPhone 15 and more robust presence in China/Android markets.

Susquehanna analyst Christopher Rolland maintained a Positive and raised the price target from $125 to $130. Skyworks reported in-line results and guidance after the close on Monday.

The September guidance is crucial as it provides insights into upcoming iPhone content. The guidance eased concerns about significant declines in content, indicating close-to-flat content year over year (YOY).

Skyworks sees potential improvement in Android bookings and demand, signaling slow recovery and normalization of inventory in the Android segment.

In Broad Markets, Skyworks experienced strength in Auto (exceeded $200 million run rate), Industrial, and Wi-Fi (secured Wi-Fi 7 router wins).

Infrastructure had a record quarter last quarter, and the company expects it to be a growth driver in 2024, contrary to the trend in the telco market.

While in line with expectations, the report is viewed positively, reflecting better-than-feared iPhone content and opportunities in the Android segment for the following year.

Price Action: SWKS shares closed lower by 1.28% at $108.76 on Tuesday.