In the year-to-date period, Skyworks Solution SWKS shares have underperformed the Zacks Computer & Technology sector and its competitor Broadcom AVGO, which offers a wider range of semiconductor solutions.

Skyworks shares have plunged 22.7%, while Broadcom’s shares have surged 43.1% in the year-to-date period. The broader sector has appreciated 28.4% over the same time frame.

The underperformance can be attributed to persistent challenges in broad markets and data centers due to elevated inventory levels amid ongoing recovery. Sluggishness in the wireless infrastructure and traditional data center markets and stiff competition from companies like Qorvo QRVO are headwinds.

Despite the challenges, Skyworks is benefiting from its diversified portfolio, evidenced by design wins across infrastructure, automotive and emerging IoT sectors.

Will SWKS Benefit From a Strong Portfolio?

Skyworks has a robust design win pipeline, particularly in the automotive and industrial sectors. It is also witnessing improving demand in edge IoT markets. Its focus on next-generation technologies, such as Wi-Fi 6E and 7 and 5G, has also been noteworthy.

In the fourth quarter of fiscal 2024, Skyworks secured 5G content for premium Android smartphones like Google Pixel 9 and Samsung Galaxy and expanded its Wi-Fi 7 design win pipeline. The company also made progress in automotive, securing design wins in 5G front-end modules, infotainment and digital isolators.

Within the mobile segment, which contributed approximately 65% to total revenues in fourth-quarter fiscal 2024, Skyworks registered signs of inventory normalization and improved order patterns. 

The company also highlighted that new AI features in smartphones could drive a multiyear upgrade cycle, leading to increased Radio Frequency complexity. This growing complexity emphasizes the need for advanced solutions, further positioning Skyworks as a leader in the market.

Skywork’s expanding clientele, which includes Semtech SMTC, has been a key catalyst.

Skywork’s collaboration with Semtech has been noteworthy. The collaboration with SMTC, featuring the SKY66423-SX1261 design, has boosted low-power wide-area network solutions for industrial and smart city applications with improved efficiency and coverage.

SWKS Q1 Outlook Dull

Despite a strong portfolio, stiff competition from companies like Broadcom and challenges in wireless infrastructure and traditional data center end markets are expected to hurt SWKS top-line growth in first-quarter fiscal 2025.

As competitors like Qorvo prepare to capitalize on the increasing demand for smartphones, the intense competition is expected to drive pricing pressure in the market, further reducing margins.

For the first quarter of fiscal 2025, the company expects revenues between $1.05 billion and $1.08 billion, up 4% sequentially at the mid-point. 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 million, indicating an 11.34% year-over-year decline. The consensus mark for earnings is pegged at $1.57 per share, which decreased 6.5% in the past 30 days. The figure calls for a year-over-year decline of 20.3%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Zacks Rank & Valuation

Skyworks shares are cheap as suggested by a Value Score of B.

The forward 12-month Price/Sales ratio for SWKS stands at 3.68, lower than the sector’s 6.12.

However, sluggish prospect makes SWKS a risky bet for growth-oriented investors, as suggested by a Growth Score of D.                

SWKS currently has a Zacks Rank #4 (Sell), which implies that investors should stay away from investing in this stock at present. 

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

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

Semtech Corporation (SMTC) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

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

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