Skyworks Solutions Inc. (SWKS)

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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