5G Will Mean Plenty Of Blue Sky For Skyworks

Analysts at Citi Research turned bullish on Skyworks Solutions Inc (NASDAQ: SWKS) given the company's potential to capitalize on a future 5G deployment. The firm's Atif Malik upgraded Skyworks' stock rating from Sell to Buy with a $125 price target.

Skyworks should be seen as an "attractive play" on the potential demand for its RF semiconductor and content for a 5G deployment, which is expected to pick up over the next three years, Malik commented in his research report. As such, the firm's Sell rating is no longer appropriate, and the stock has an upside potential of around $20 per share moving forward.

Malik's prior Sell thesis was also based on assumptions of broader concerns on RF gross margins within the decelerating smartphone market. But gross margins have now shown signs of stabilization in the 50 to 51 percent range year to date, and the company does see upside to margins to 53 percent over the long term.

Finally, a bullish stance is also warranted on the carrier aggregation opportunity. A "move to higher frequencies in 5G, which often require TDD modulations help Skyworks stretch TC SAW filters, especially in China where TDD is the main driver for up-link carrier aggregation," the analyst explained.

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