Skyworks Solutions is an iPhone supplier, as well as for Samsung and Huawei phones. However, with smartphone sales slowing everywhere the chip maker has fallen on troubled times.
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SWKS - Skyworks Solutions - Company Description
Skyworks designs, develops, manufacturers and markets proprietary semiconductor products. They are a component supplier to smartphone makers worldwide.
We all know about the decline in iPhone sales in Q1 and Apple's order to cut manufacturing by 30% in Q2 after a similar decline in Q1. iPhone sales are slowing but it is not just the iPhone. Chinese smartphone manufacturers are all struggling to increase sales in a saturated market. In China about 45% of the phones have now been upgraded to 4G and the industry is ramping up the transition to 5G in late 2017. That means the 2016 versions of new phones have a shortage of new features to justify their hefty prices.
In their earnings last week Skyworks reported operating earnings of $1.25 compared to estimates for $1.15. Revenue of $775.1 million rose only 1.7% from the year ago quarter and missed current estimates. The company guided to current quarter revenues of $750 million with earnings of $1.21. These were below analyst estimates.
Skyworks is a great company. They are well positioned for future growth, have many new products, $1.177 billion in cash and zero debt. They are paying a 26-cent dividend on June 2nd to holders on May 12th. Their problem is the slowing smartphone market.
We know they will have a good Q4 because of the Apple iPhone 7 but the next few weeks of summer doldrums could see them touch a new low on the iPhone sales cloud currently hanging over the sector.
Shares rebounded from the opening dip on Friday along with the market. I think we should use this bounce to initiate a new short term put position on Skyworks.
With a SWKS trade at $64.15
Buy June $62.50 put, currently $2.30, initial stop loss $67.50.