Skyworks Solution SWKS shares have lost 5.6% over the past three months, underperforming the broader Zacks Computer and Technology sector and its competitor Broadcom AVGO, which offers a wider range of semiconductor solutions. While the sector has gained 9.7% over the past three months, the Broadcom stock has soared 44.3%.

The underperformance was led by the dismal results for the fourth quarter of fiscal 2024. Skyworks’ revenues declined 15.9% year over year in the quarter, whereas non-GAAP earnings plunged 29.5%.

Skyworks’ fiscal fourth-quarter performance suffered from high inventory levels, uneven demand across segments, and muted global demand in automotive and industrial markets. The broad market segment showed modest sequential growth, but weakness in infrastructure and automotive end markets hurt the overall performance. Sluggishness in wireless infrastructure and traditional data center markets, along with stiff competition from companies like Qorvo QRVO and Cirrus Logic CRUS, posed challenges.

SWKS’s Dull Outlook Triggers Downward Estimate Revisions

Challenges in wireless infrastructure and traditional data center end markets are expected to continue hurting Skyworks’ financial performance in the near term. Stiff competition from players like Broadcom, Qorvo and Cirrus Logic is expected to increase pricing pressure in the market and affect margins.

For the first quarter of fiscal 2025, Skyworks expects revenues between $1.05 billion and $1.08 billion. Non-GAAP diluted shares are expected to be $1.57 per share. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $1.07 billion, reflecting an 11.4% year-over-year decline.

The consensus mark for fiscal 2025 earnings has been revised downward by 4 cents over the past 60 days to $5.34 per share. The bottom-line estimate indicates a decline of 14.8% from fiscal 2024 earnings of $6.27 per share.

Broad Portfolio to Boost Skyworks’ Prospects

SWKS boasts a robust portfolio, including amplifiers, antenna tuners, DC/DC converters, detectors, diodes, ProSLIC and voltage-controlled oscillators. These key components position the company to capitalize on growing demand across wireless connectivity, IoT, automotive, and data centers, offering strong prospects for growth and innovation.

The company is experiencing improved demand as customers adopt Wi-Fi 6E and 7 systems, which offer higher dollar content due to increased complexity and additional bands. With Wi-Fi 7 shipments gaining momentum, the industry is entering the early phases of a multi-year upgrade cycle.

Skyworks maintains a long-term bullish outlook on the broader market, supported by secular trends in edge IoT, automotive electrification, advanced security systems and AI-driven workloads.

SWKS is positioning itself to capitalize on the growing demand for wireless connectivity, driven by data consumption, AI and 5G. The global mobile data use, especially for 5G, is expected to triple in the next three years. By 2029, 39 billion IoT connections, including connected cars and devices, are anticipated.

Skyworks is partnering with mobile customers to create efficient connectivity solutions. Mobile revenues grew 21% sequentially, and the company expects continued growth in the December-end quarter, with normalized orders, inventory and seasonal product ramps.

SWKS’s Zacks Rank & Valuation

Skyworks encountered challenges from high inventory, uneven demand, and weakness in automotive and industrial markets, alongside strong competition. However, its focus on 5G, IoT and AI positions the company well for long-term growth.

SWKS’s Value Score of C indicates a stretched valuation at this moment. It currently has a Zacks Rank #4 (Sell), which implies that investors should stay away from the stock for the time being. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Skyworks Solutions, Inc. (SWKS) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

Cirrus Logic, Inc. (CRUS) : Free Stock Analysis Report

Qorvo, Inc. (QRVO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research