Business Description

Skyworks Solutions produces semiconductors for wireless handsets and other devices that are used to enable wireless connectivity. Its main products include power amplifiers, filters, switches, and integrated front-end modules that support wireless transmissions. Skyworks’ customers are mostly large smartphone manufacturers, but the firm also has a growing presence in nonhandset applications such as wireless routers, medical devices, and automobiles.

Recommendation (Nov 2020)

A good business, but overvalued.

$140.39 per share implies that SWKS will grow its revenue and NOPAT at a CAGR of 8% over the next 10+ years. The business and its competition need to be investigated to answer: “Is this growth achievable?”

If we assume that EPS will grow between 6-10% CAGR for 5 years and that SWKS will trade at a PE multiple of 20x in 2025, then the implied Investor Return would be between 0.2-3.0%.

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