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Skyworks launched the SKY4680x family, a group of audio digital signal processors (DSPs) that handle sound processing in cars. These chips are designed to be scalable, meaning car makers can use the same basic software and hardware design for everything from basic models to premium vehicles.
This launch is part of the company's effort to grow beyond its main business of smartphone chips. While mobile phones still drive most of its revenue, the automotive market offers a steadier source of growth as cars become more reliant on complex electronics for entertainment and communication systems.
Source: GlobeNewsWire
Barclays lowered its rating on the stock from Overweight to Equal Weight, which is their version of a hold. The average price target across all analysts now sits at about $83.
This move comes as the company works to integrate its massive merger with Qorvo. While that deal gives Skyworks more scale to compete with rivals like Broadcom, analysts are concerned that a sluggish market for new smartphones could make it harder to pay down the debt used to fund the merger.
Source: Barclays
After Skyworks reported its November results, we updated our fair value. We lowered our quality score to 2.9 as we now rate its sales growth and investment returns differently. We changed our rating from Buy to Watch. We added the debt from the Qorvo purchase to what we track and we reset our assumptions for how much revenue comes from Apple.
Skyworks delivered a steady quarter with results that slightly topped expectations. The company brought in $1.05 billion in revenue and earned $1.28 per share, just ahead of the $1.27 analysts were looking for. While the numbers themselves were stable, the focus is shifting to the company's massive merger with its rival, Qorvo.
Management expects the combined company to save at least $500 million a year by cutting overlapping costs. This merger is the core of the company's plan to gain more power over pricing and expand into new areas like automotive and defense chips. For long-term owners, the success of this integration and the promised cost savings will be more important than the small beat in this quarter's results.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts expect the chipmaker to report revenue of about 1.04 billion dollars. The main thing to watch is how much progress the company is making in its broad markets business, which includes chips for cars and data centers. Growth there is key to reducing the company's heavy reliance on Apple and the smartphone cycle.
Management has cleared the analyst target every quarter for two years, but usually by just a few cents. This suggests they set a conservative bar they know they can hit.
| Expectation | |
|---|---|
| EPS | $1.24 |
| Revenue | $1.85B |
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