Why Skyworks Solutions (SWKS) Stock Is Trading Lower Today

Max Juang /
2024/05/01 12:09 pm EDT

What Happened:

Shares of wireless chips maker Skyworks Solutions (NASDAQ: SWKS) fell 14.9% in the pre-market session after the company reported first quarter results: its free cash flow missed, and its revenue and EPS guidance for the next quarter fell short of analysts' expectations. Management attributed the weaker outlook to an anticipated decline in its mobile business as it cleared its excess inventory. 

A silver lining was that the company announced a dividend of $0.68 per share, which will be paid on June 11, 2024 to stockholders of record on May 21, 2024. Overall, this was a tough quarter for Skyworks Solutions. 

Following the results, TD Cowen analyst downgraded the stock's rating from Buy to Hold and lowered the price target from $125 to $90. The analyst added "We remain encouraged at Skyworks' efforts to strategically position the business following a difficult recent macro environment, yet see an approximately 10% loss that may or may not be temporary as too much to overcome."

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What is the market telling us:

Skyworks Solutions's shares are somewhat volatile and over the last year have had 3 moves greater than 5%. But moves this big are very rare even for Skyworks Solutions and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 12 months ago, when the stock dropped 7.9% on the news that the company reported second-quarter results that missed analysts' revenue, free cash flow, and earnings per share (EPS) estimates. Gross margin also declined, and inventory levels rose. In addition, revenue and EPS guidance for the next quarter came in below expectations. 

Like many peers that have reported earnings this season, management cited a challenging macro environment, adding to the uncertainty in financial projections for the coming quarters. Overall, it was a weaker quarter for the company.

Skyworks Solutions is down 17.4% since the beginning of the year, and at $90.16 per share it is trading 21.6% below its 52-week high of $115.04 from July 2023. Investors who bought $1,000 worth of Skyworks Solutions's shares 5 years ago would now be looking at an investment worth $1,018.

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