What Happened:
Shares of wireless chips maker Skyworks Solutions (NASDAQ: SWKS) fell 6.3% in the morning session after stocks of semiconductor companies that design chips used in smartphones fell after Wall Street analysts raised concerns about the shipping time of iPhone 16 Pro models relative to the previous year.
Adding to the signs of weak demand, TF Securities analyst Ming-Chi Kuo added that "demand for the new iPhone 16 is lower than expected — and down 12% year over year from the first-weekend sales of the iPhone 15 last year." Concerns raised by the analyst include intense competition in the Chinese market and the unavailability of Apple Intelligence (a major selling point) during the iPhone 16 release.
Apple shares declined 3% following the reports, hinting at potential vulnerabilities in the coming quarters. Notably, weak demand for the iPhone 16 could translate to lower production volumes, which could, in turn, inform the decision to reduce demand for components like chips, potentially causing a slowdown for semiconductor companies supplying these inputs.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Skyworks Solutions? Access our full analysis report here, it’s free.
What is the market telling us:
Skyworks Solutions’s shares are somewhat volatile and over the last year have had 4 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 14.9% on the news that 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.
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."
Skyworks Solutions is down 12.2% since the beginning of the year, and at $95.79 per share it is trading 20.6% below its 52-week high of $120.68 from July 2024. Investors who bought $1,000 worth of Skyworks Solutions’s shares 5 years ago would now be looking at an investment worth $1,168.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.