Brean Capital’s Mike Burton shed light on several top stocks in the technology sector before earnings are released. Four of the companies highlighted by Burton are Skyworks Solutions Inc (NASDAQ:SWKS), QUALCOMM, Inc. (NASDAQ:QCOM), Qorvo Inc (NASDAQ:QRVO), and Himax Technologies, Inc. (ADR) (NASDAQ:HIMX). Mike Burton has a 66% overall success rate recommending stocks with a +20.8% average return per rating when measured over one year with no benchmark.
Skyworks will be reporting third quarter results tomorrow, July 23, after market close. Burton is expecting the company to post “in-line” results, though his estimates are slightly lower than those of the Street. Burton forecasts earnings per share of $1.28 on $800 million in revenue compared to the Street’s forecast of $1.29 EPS on $802 million in revenue. In the same quarter of last year, Skyworks posted EPS of $0.58 and revenue of $587 million.
Burton believes Skyworks benefitted this quarter from “additional content… gained at Samsung (the GS6 included the SkyOne Ultra front-end module as well as the Diversity Receive module).” However, the analyst is quick to note that Skyworks was also negatively impacted by “unit weakness.” Burton adds, “MediaTek,” a semiconductor company that works with Skyworks, “was flattish but saw a mix-up towards 4G, and China performed in-line with Company expectations.”
Looking forward, Burton expects September guidance to be “slightly higher than Consensus estimates on the back of content increases across its customers.” He continues, “SWKS is seeing content gains across its diversified customer base, but the amount of the guidance upside will ultimately come down to the additional dollar content SWKS is seeing from Apple.”
Mike Burton currently has a Buy rating on Skyworks Solutions with a $110 price target.
Qualcomm will be posting earnings today, July 22, after market close. Burton expects the company to post $5.867 billion in revenue and earnings per share of $0.96. Both estimates are in-line with those of the Street. In the same quarter of last year, Qualcomm posted revenue of $6.81 billion and earnings per share of $1.31.
Burton attributes the low expectations to “issues with Samsung and concerns regarding smartphone sales in China considering the end-of-quarter downtick for China subs.” The analyst added, “there will be a big effect on mix due to high-end loss at Samsung, which will drive operating margins down more than 700bps sequentially to bottom out below 10%.”
Looking forward, Burton expects the September quarter to be in-line with estimates as well. He notes that the company is still “grappling” with losing Samsung as a customer and now faces fierce competition from Spreadtrum and MediaTek. However, the analyst is confident that Qualcomm “has the lead in technology and will be able to support the transition to 3xCA Downlink and CA Uplink quicker than its competitors which will drive market share next year.”
Mike Burton currently has a Buy rating on Qualcomm with an $80 price target.
Qorvo is scheduled post quarterly earnings on Wednesday, July 29, after market close. Burton is forecasting earnings per share of $1.08 on revenue of $666 million. Both figures are in-line with estimates from the Street. In the quarter prior, Quorvo posted revenue of $634.9 million.
Burton believes earnings will be driven by several factors, including: “1) Apple strength holding up longer than expected; 2) relative strength from Huawei, an early adopter of RF Flex and RF Fusion; and 3) MediaTek’s ramping single-chip LTE platforms, where Qorvo gained share vs. the last gen.”
Looking forward, Burton expects Qorvo to offer September guidance that is up 16% sequentially, which is well above the Street’s consensus. The analyst is looking for “content gains at Apple [and] strength from Huawei,” a Chinese telecommunications firm that works with Qorvo. Furthermore, Burton is expecting future guidance to be driven by “a doubling of [Qorvo’s] exposure to MediaTek’s ramping 4G platform, and increasing content at Samsung to all drive the guide above consensus.” Overall, the analyst believes that the company is “very well-positioned in the China market.”
Mike Burton currently has a Buy rating on Qorvo with a $95 price target.
Himax will be posting quarterly earnings on August 7 before the market opens. Burton is estimating quarterly revenue of $167 million, compared to the Street’s estimate of $173 million. Both Burton and the Street forecast EPS of $0.05. In the same quarter of last year, Himax posted earnings per share of $0.14 on revenue of $196.4 million.
Burton believes the company provided “conservative” estimates for the quarter. Since “the environment has improved relative to guidance,” the company may beat estimates. “However,” Burton qualifies, “we’re not expecting huge upside to the quarter and guidance as we believe 4K has been weak and there has been a mix-shift towards AMOLED taking place at Samsung, which will impact Himax’s large-panel DDI business as HIMX does not yet supply AMOLED DDIs.”
Looking forward, Burton expects the company to guide next quarter’s revenue below the Street’s consensus of $211 million. He continues, “We believe the Company’s small-mid IC display driver revenues will pick up with the China smartphone market, but note that HIMX lacks exposure to relative outperformers Apple and Xiaomi.”
Mike Burton currently has a Hold rating on Himax with a fair value range between $5 and $8.