SWKS are more attractive compared to its peers

9 lis 2022

SWKS
Skyworks has released its earnings related to Q4 and full fiscal year 2022 (FY 2022) at the end of last week, beating slightly revenue and earnings estimates. Note that its top and bottom-line beats were quite small, in line with the past seven quarters. Not surprisingly, its share price reaction was muted, as key financial figures were practically very close to expectations. Skyworks' revenues amounted to $1.4 billion in the fourth quarter of FY 2022, up 7% YoY, and reaching a new record for Q4. For the full year, its revenue was close to $5.5 billion, also up 7% YoY, driven by both Mobile and Broad Markets. While this is not particularly impressive for a growth company, it's much better than compared to its peer Qorvo (QRVO), which has reported a revenue decline of close to 8% YoY in the last quarter, due to weakness in the mobile segment.
Broad markets were particularly strong in recent month, reporting revenue growth of 30% YoY in the last quarter, and account now for some 36% of total revenue. In this segment, Skyworks has very good long-term growth prospects, coming from IoT, automotive connectivity, or industrial automation which are strong revenue tailwinds over the next decade. Its gross margin in Q4 was 51.3% (non-GAAP), also higher than its peer, and above its level in the same quarter of last year.
Skyworks' valuation is as low as peers like Qualcomm, who are seeing an outsized negative impact on its relationship with smartphones. Skyworks is taking advantage of being a "single customer revenue center" that needs its components in the worst way. There's a reason Qualcomm has a premium valuation in forward earnings, as it's larger and has more diversity. But Skyworks' advantage is being able to ride on the side of bypassing inventory reductions and adding more content wins. Furthermore, the risk in Skyworks is far reduced as its forward P/E ratio is well below any of its track record. We're bordering on the 2008 financial crisis, where its P/E dropped to 5.5. Apple's Pro versus Plus mix problem played a role in Skyworks avoiding most of Apple's inventory adjusting.
Skyworks has been put in a unique position, some by its own doing of having significant content in a top-tier smartphone, and some by its customer constraining itself without needing to draw down its flagship model's inventory. This means Skyworks can skirt many current inventory adjustments while pushing demand into the current and next quarters. With a historically low valuation, while expecting only a negative growth period to last a short while (six months or less), the stock are more attractive compared to peers.

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