Don't Mind The Profit-Taking; Skyworks Set Up For A Strong 2017

Skyworks Solutions Inc (NASDAQ: SWKS)'s fiscal second-quarter earnings report Thursday came in better than expected while the company's third-quarter outlook also exceeded expectations. But shares of Skyworks were trading lower by more than 2.5 percent by Friday's pre-market session as some investors were taking profits off the table following a 45-percent return over the past year.

Edward Snyder of Charter Equity Research maintains a Buy rating on Skyworks' stock after the earnings report. The analyst acknowledged that the decline is likely due to profit taking but investors shouldn't be concerned.

Snyder argued that Skyworks' report demonstrated it is seeing "robust" content gains without worrying about share shifts or excess channel inventory from lower-end manufacturers in China.

In fact, the analyst sees Skyworks making a bigger push into more advanced 4G at Apple Inc., while at the same time, clients like Samsung and Huawei "plays to Skyworks' strength" in diversity receive modules (DRX) and low noise amplifiers (LNAs).

Also, Skyworks will likely benefit from low-end Chinese manufactures who are now working on their first advanced 4G models.

Tailwinds And iPhone 8 Boost

Snyder further noted last year Skyworks was hurt from excess channel inventory, which prevented the company from recognizing around $30 million a quarter of iPhone 6s sales. But this now represents a "tailwind" for the bottom half of 2017, especially when factoring in the potential for content gains and higher iPhone 8 unit sales, which could generate "significant" upside form Apple Inc. (NASDAQ: AAPL).

Snyder also stated that Skyworks' growth and guidance for the bottom half of 2017 could end up coming in "materially better" compared to expectations.

Bottom line, the analyst sees Skyworks' benefiting from "strong and improving" fundamentals and positive news items from now through October. Unfortunately, this creates a scenario where there "isn't likely to be a good entry point anytime soon."

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Image Credit: © Raimond Spekking, via Wikimedia Commons