Skyworks Solutions (NASDAQ:SWKS) has set the Street ablaze this year, as the stock has almost doubled since I recommended it in January. The stock has been driven by impressive results, solid growth and bright prospects. When Skyworks reported its third-quarter results, it recorded net income of $111.4 million, up from $65.7 million in the prior-year quarter.
In addition, its total revenue was $587.0 million, up 34.6% year-over-year and more than the consensus estimate of $570 million. The adjusted earnings came in at 83 cents per share, up 29 cents year-over-year and ahead of the consensus estimate of 71 cents.
Innovations are driving growth
Hence, it is clear that Skyworks is seeing solid growth. But investors can expect the company to deliver an identical performance in the future, as the company is developing and optimizing chips that support Internet of Things applications. It is investing aggressively in IoT initiatives and developing custom solutions which have helped it earn many design wins.
The company recently joined with Panasonic in a joint venture to replenish system capabilities, while extending its technology portfolio and improve financial performance. Both companies will work together on developing high-performance filters, which will be used for signal processing and removing interference in various electronic devices to improve and deliver the required frequency.
Skyworks also recently launched ultra-low noise amplifiers to be used in applications such as "cellular infrastructure, wireless connectivity and broadcast communication applications." These amplifiers will deliver top notch "noise figure, high gain and linearity, improving receiver sensitivity and dynamic range."
These product development moves will allow Skyworks to gain more traction in the cellular and connectivity markets. This can be said because Skyworks will be able to deliver cutting-edge products to customers, and thereby gain more business from customers.
Skyworks plans to satisfy the demand for efficient networking technologies that can deliver larger capacity at lesser costs. This need grew out of the increase in demand for mobile data.
Smartphones have also been a big reason behind the company's success. The two giants, Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF), have competed to contribute around half of Skyworks' revenue the previous year. This year things can get better, as the battle in the smartphone segment is heating up, which will ultimately benefit Skyworks. Skyworks provides chips for Samsung's Galaxy S5, and this account will continue to serve it well with the Galaxy S6 later this year.
Apple is going to launch two new versions of the iPhone with Skyworks chips in it in the coming month. Also, what might drive Skyworks' revenue this year is Apple's iPhone 6. Skyworks already supplies a number chips to Apple, and with the upcoming iPhone, this number is expected to improve, as around 80 million units of the iPhone 6 are going to be manufactured.
The two versions of iPhone 6 are expected to surpass sales of the previous version of the iPhone by around 20%, and this might benefit Skyworks, as the company has a long-standing relationship with Apple. Moreover, last time, Skyworks' dollar content in Apple devices had increased, and investors can expect it to happen again.
Now, a look at Skyworks' guidance for the current quarter indicates that the company might have probably landed a spot in the Apple iPhone yet again, as its revenue is expected to rise 42% year-over-year. This can be expected, as Apple will be ramping up production of the iPhone.
Some more positives to consider
Skyworks is delivering enormous growth on numerous fronts such as the cloud, wide area networks and connected homes, which will possibly increase the demand for connectivity chips. Also, the company provides its custom analog solutions that help in easing connectivity across a wide range of communications. The company has more new revenue drivers, including new product types such as small cells and tablets, and new verticals such as automotive, medical and enterprise.
Moreover, its management is investor-friendly, as Skyworks repurchased around 1 million shares during the previous quarter. It also started a quarterly dividend payout to provide attractive risk-adjusted returns to its stockholders. The company will pay a cash dividend of $0.11 per share to investors.
All in all, Skyworks is making some really good moves to tap the opportunities in the end-market. The company's performance has been noteworthy so far, and looking ahead, the pace of growth should continue due to its innovative moves.
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