Why Skyworks Solutions Is Soaring Above the Competition

Source: Thinkstock

Source: Thinkstock

Skyworks Solutions (NASDAQ:SWKS) stock is sitting at an all time high. The company works with the largest tech firms on Earth and provides analog semiconductors worldwide. Its product portfolio includes amplifiers, attenuators, battery chargers, circulators, DC/DC converters, demodulators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure radio frequency subsystems, isolators, LED drivers, mixers, modulators, optocouplers, optoisolators, phase shifters, phase locked loops/synthesizers/VCOs, power dividers/combiners, power management devices, receivers, switches, voltage regulators, and technical ceramics. The company also offers MIS silicon chip capacitors and transceivers. It provides products for supporting automotive, broadband, cellular infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone, and tablet applications. The company sells its products directly, as well as through independent manufacturers, representatives, and distribution partners. The purpose of this article is to discuss and explain why shares of this company are at all time highs.

Skyworks has been very successful and shareholders have been rewarded handsomely over the last few years. However, yesterday and today the stock rocketed higher to new all time highs. But why? It is because the company unexpectedly updated its financial outlook for the third-quarter of fiscal 2014. The company now anticipates current quarter revenue of $570 million, representing a 31 percent year-over-year increase and 19 percent sequential growth. These numbers are huge for a company like this.

Skyworks also expects to deliver non-GAAP diluted earnings per share of $0.80, reflecting a 48 percent increase when compared to the same period a year ago and 29 percent sequential growth. The company had previously guided to $535 million in revenue and $0.73 of non-GAAP diluted earnings per share on April 22, 2014 as part of its second fiscal quarter earnings release. David J. Aldrich, chair and chief executive officer, stated the following:

As our upwardly revised outlook reflects, Skyworks is capitalizing on the growing opportunity within the Internet of Things as well as increasing analog complexity associated with higher data rate connectivity standards, both of which are enabling us to substantially outpace the growth of the broader semiconductor market. These macro trends continue to validate our investments in highly differentiated, custom solutions that are facilitating an expanding set of end markets. Based on our design win traction and order visibility, we anticipate continued strength beyond the June quarter as our products continue to gain momentum.

You cannot go wrong with buying shares here even at all time highs. The company guided higher because it works with the biggest and best handset makers, including Google, Apple, Samsung, HTC, LG, Sony — among others. Skyworks will remain a major player in this space with this type of customer base. With Apple expanding analysts expect 20-30 million more iPhones will be shipped as a result of Apple’ move into China and each one contains Skywork’s components. Further, the company itself even pays a dividend, which I expect to be raised in the near future given the earnings power of the company

Disclosure: Christopher F. Davis holds no position in Skyworks Solutions and has no intentions of initiating a position in the next 72 hours. He has a strong buy rating on the stock and a $68 price target.

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