I’d just say that anyone who can read the prepared remarks in the conference call (and add as much of the Q&A as you like), and not want to run out and buy more SWKS, has more self-control than I do.
50% gross margins this quarter (up from 45% a year ago), 51% next quarter, 53% shortly, 55% long range, etc, etc. (By the way, does this sound like a company whose products are being commoditized by price cutting competition?) And there’s more, lots more, in the call. Read it yourself to catch the enthusiasm and assurance in their voices.
I started adding to my ‘best buys’, so I added swks to my brokerage yesterday and a little to my IRA in premarket today. Added INFN, SKX, ABMD yesterday. Not doing it all at once. I will sell AMBA to fund the rest. I previously sold dividend stocks (MF Income Investor… has had some stock crashes that make BOFI, SKX, etc., look good and I had trimmed those on the way down). Since I have much less dividend coming in I need 2 or 3 years IRA distribution in cash so need to trim AMBA now for adding to the best buys. SWKS and INFN are compelling now and SKX o.k. to add a bit at a time. IMHO.
The analysts all congratulated them on a great quarter and guidance, but they still seem skeptical as to how the company is pulling it off. Several questions like, how do you feel about 2016? how confident are you in your guidance? etc. Well, they are guiding up on all fronts with improved margins. How do you think they feel??
Here’s one example. I liked Aldrich’s response:
Atif Malik - Citigroup Global Markets, Inc. (Broker) Hi. Thanks for taking my question, and congratulations on another strong quarter. Dave, a question on the gross margins. If I look at other component makers in smartphone market application processor, I mean, those guys are talking about ASP pressures next year, and you guys are planning to expand your gross margin. So help me understand why the pricing environment or the gross margin profile for RF guys should remain strong into next year in a decelerating year-over-year smartphone unit environment?
David J. Aldrich - Chairman & Chief Executive Officer Well, it’s relatively simple. It isn’t a year-over-year, part-to-part comparison. We are increasingly integrating more functionality as these devices get more complex, and we’re seeing fewer competitors able to do it. Customers can’t handle discrete components any longer, and that level of integration required to have a product that consumes low current, that’s small, that is highly integrated requires many, many different functional blocks with process technology know-how pulled together in a low-cost manufacturing platform with great system architectures.
So, we are able to work with our customers to give them a differentiated system performance which is increasingly becoming analog and RF dependent; less digital and more analog and RF dependent, and that’s our sweet spot. And so our customers it isn’t as if that we’re charging our customers more, per se, per function, it’s that they’re giving us more of the system requirement and they’re paying us for it because we’ve generated we add a great deal of value for them.
Those analysts on the quarterly report all seemed impressed with the results, why is the buying so muted?
Hi Justin,
As one of the analysts said as he recently increased estimates, "People just don’t get it yet with this company. They just think of it as an "Apple supplier.‘’’ They also keep thinking it’s in danger of being designed out and replaced in three weeks if someone comes in with a cheaper price. There are few things in probability that are 100% or 0%, but after reading the conference call and understanding what is going on, I think you can confidently say that there is a 0% probability, or less [put smiley face here], that that will happen.
Saul
This is still probably my favorite stock. Has has some time to consolidate gains and feels like a very low risk entry point here.
I’d like to see semis make a comeback and this should take off. AMBA has good potential to rip as well, but some more risk there even though the chart may be in a better spot.
I’d just say that anyone who can read the prepared remarks in the conference call (and add as much of the Q&A as you like), and not want to run out and buy more SWKS, has more self-control than I do.
50% gross margins this quarter (up from 45% a year ago), 51% next quarter, 53% shortly, 55% long range, etc, etc. (By the way, does this sound like a company whose products are being commoditized by price cutting competition?) And there’s more, lots more, in the call. Read it yourself to catch the enthusiasm and assurance in their voices. Saul
Completely agree. Lovely fundamentals. Position built right up again to the full 2.5%. streina
Thanks, streina, we don’t often fully agree, but it’s nice that we totally agree about SWKS, coming from what seem to be different ways of evaluating.
Saul