Analyst: 5 Headwinds Facing Skyworks Solutions

Skyworks Solutions Inc SWKS's reliance on Apple Inc. AAPL — the iPhone-maker reportedly accounted for 40 percent of the semiconductor manufacturer's 2016 revenue — could serve as a negative catalyst, according to Charter Equity Research.

The Analyst

Charter Equity Research analyst Edward Snyder maintained a Buy rating on Skyworks shares.

The Thesis

Several negative trends will pressure the performance of Skyworks in 2018, Snyder said in a Monday note. The headwinds identified by Snyder include:

• Lower than projected content gains on the 2018 iPhone.
• Weak demand for the iPhone 8/X and Galaxy S9.
• "Significant" content declines in Huawei's P and Mate phones. 
• Qorvo Inc QRVO's resurgence on the basis of Mediatek's Phase 6 at Oppo, Vivo and Xiaomi.
• Module issues with Samsung Electronics Co Ltd SSNLF's flagship handsets..

Slowing demand for flagship phones at Apple and Samsung is likely to hurt Skyworks' March and June quarter performance, while the rest of the issues are late-2018 problems, the analyst said. 

If Skyworks issues in-line guidance as it attempts to fill the gap created by weak units and content, Snyder predicts a negative surprise and a sell-off in September.

If the semi company instead chooses to use the recent sell-off to lower June quarter and full-year guidance on its May 3 earnings call, the analyst expects the stock to trade flat near-term and higher in the second half of 2018. 

Materially higher RF content is likely in 2019 and 2020, as is a continued move to larger modules, which would work in favor of Skyworks, Qorvo and Broadcom Inc AVGO, according to Charter Equity Research. 

The sell-side firm lowered its estimates for Skyworks to reflect the negative catalysts. 

The Price Action

Skyworks shares have lost 3.7 percent year-to-date.

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Photo courtesy of Apple.