Today's

top partner

for CFD

Unlike the Android smartphone market that’s starting to bottom out, Apple (NASDAQ: AAPL) products are still in a bit of a downturn. Sure, the iPhone 15 looks like a hit, and MacBook demand is bottoming, but other products are still coming off of peak sales levels in 2022 as consumer spending cools.

That’s having an outsized effect on Apple suppliers, and especially wireless connectivity chip specialist Skyworks Solutions (NASDAQ: SWKS). The stock keeps falling and by some metrics looks dirt cheap, but there might be better ways to play the next bull market for mobile technology.

Apple’s declines blast a key chip partner

Apple reported a modest year-over-year uptick in iPhone revenue (up 2.8%) during its final quarter of fiscal 2023 (the three months ended in September), ending a not-so-great year for Apple’s bread-and-butter product. To kick off fiscal 2024, management said the iPhone 15 is a hit, and momentum will continue through its next quarter (the three months ending in December 2023).

MacBook revenue, which just fell 34% year over year in the last quarter, is also expected to begin a rebound. This will no doubt be helped by the recent surprise announcement of new MacBooks powered by the M3 chip.

The problem is, Apple product sales overall fell in fiscal 2023, and especially so in non-iPhone revenue. Apple has a large software and services segment that can help offset the pain. Nevertheless, the falling hardware sales had a big impact on Skyworks Solutions, which still counts nearly 70% of its sales from Apple.

Apple Product Segment

Fiscal 2023 Revenue

YOY Increase (Decrease)

iPhone

$200.6 billion

(2.4%)

Mac

$29.4 billion

(27%)

iPad

$28.3 billion

(3.4%)

Wearables, home, and accessories

$39.8 billion

(3.4%)

Services

$85.2 billion

9.1%

Data source: Apple. YOY = year over year.

Skyworks Solutions Metric

Fiscal 2023

YOY Increase (Decrease)

Revenue

$4.77 billion

(13%)

Earnings per share

$6.13

(22%)

Free cash flow

$1.65 billion

76%

Data source: Skyworks Solutions.

A good bet on an upturn?

The lone positive in the above report from Skyworks is the free-cash-flow (FCF) print, which made a recovery from depressed levels in 2022 (when the downturn for chips tied to consumer markets began) to an FCF profit margin of nearly 35% in the last year. That’s a similar dynamic that worked in the favor of fellow mobile chipmaker Qualcomm as well.

The good news is that Skyworks management believes an FCF margin of over 30% is sustainable, too.

The bad news, though, is that Skyworks’ business outside of smartphones (including mostly iPhone, but some Android and other non-smartphone sales, too) will remain in decline. Skyworks’ guidance for the final three months of calendar year 2023 (like Apple, the first quarter of fiscal 2024) implies revenue will be down 6% from a year ago at the midpoint.

What’s really frustrating is that Skyworks is still joined at the hip to Apple and the now sluggish smartphone market overall, while other companies (again, like Qualcomm) have made far more robust headway in places like automotive technology. It’s not for lack of trying. Remember, Skyworks made that big automotive and infrastructure acquisition from Silicon Laboratories over two years ago, and it’s still not having the big impact on the business’s transformation like what was expected.

At any rate, by some metrics, Skyworks stock looks really cheap at just under 15 times trailing-12-month earnings and less than 9 times FCF. But the market hasn’t been impressed with the lack of guidance for a more pronounced upswing in sales activity for this chipmaker. I sold my shares in Skyworks a few months ago, and at this point, the company still appears to be taking it on the chin from Apple’s overall lackluster product sales growth. Qualcomm looks like the better mobile chip stock at this point in time.

10 stocks we like better than Skyworks Solutions
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Skyworks Solutions wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 6, 2023

Nicholas Rossolillo has positions in Apple and Qualcomm. The Motley Fool has positions in and recommends Apple and Qualcomm. The Motley Fool recommends Silicon Laboratories and Skyworks Solutions. The Motley Fool has a disclosure policy.

Read the full story: Read More“>

Blog powered by G6

Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.

For any inquiries, please contact [email protected]