Analyst: 5 Headwinds Facing Skyworks Solutions

Skyworks Solutions Inc (NASDAQ: SWKS)'s reliance on Apple Inc. (NASDAQ: 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 (NASDAQ: QRVO)'s resurgence on the basis of Mediatek's Phase 6 at Oppo, Vivo and Xiaomi.
• Module issues with Samsung Electronics Co Ltd (OTC: 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 (NASDAQ: 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.

Related Links:

Rosenblatt Says Qualcomm RF efforts Could Become Headwind For Skyworks, Qorvo

An Easy-To-Use Cheat Sheet For Apple Suppliers

Photo courtesy of Apple.