In a research report released today, Brean Capital analyst Mike Burton reiterated a Buy rating on shares of Skyworks Solutions Inc (NASDAQ:SWKS), while reducing the price target to $100 (from $120), which represents a potential upside of 22% from where the stock is currently trading. The report comes after the company announced its intent to acquire PMC-Sierra, and following the company’s preliminary third-quarter results, which were slightly ahead of the Street’s consensus.
Burton observed, “We estimate the acquisition will diversify Skyworks’ revenues exposure to mobile (and Apple AAPL $111.31, Buy in particular) from 78% in Q2 to roughly 66% going forward. PMCS’ end markets have much longer design cycles than mobile but tend to be lumpier, which has led to earnings volatility. However, we are optimistic that integrating PMCS’s product portfolio will not impair SWKS management’s execution record.”
Furthermore, “We believe the upside to the quarter was largely driven by significant content gains in the iPhone 6S. Looking forward to December, the Company noted that it is too early to give guidance but expects continued share gains and above market growth. We note the Street is modeling December up 6%, in line with SWKS’ 5-year average for December.”
Bottom line: “We are encouraged by Skyworks’ effort to diversify away from mobile and leverage its scale and supply chain into high-growth markets. Due to compressing market multiples, we are lowering our price target from $120.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mike Burton has a total average return of 9.4% and a 52.2% success rate. Burton has a 62.8% average return when recommending SWKS, and is ranked #458 out of 3769 analysts.
Out of the 21 analysts polled by TipRanks, 19 rate Skyworks stock a Buy, while 2 rate the stock a Hold. With a return potential of 31%, the stock’s consensus target price stands at $107.42.