Skyworks Reports 2018 Q3 Earnings

Investment Analysis Clubs Saul’s Investing Discussions
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Foolish contributor Brian Feroldi had a nice breakdown of the quarter here: https://www.fool.com/premium/coverage/investing/2018/07/20/s…

Here’s a quick look at some of the numbers:


Revenues (millions)		Q1		Q2		Q3		Q4			
2013				453.7		425.2		436.1		477.0		
2014				505.2		481.0		587.0		718.2		
2015				805.5		762.1		810.0		880.8
2016				926.8		775.1		751.7		835.4
2017				914.3		851.7		900.8		984.6
2018				1,051.9		913.4		894.3

EPS (non-GAAP)		        Q1		Q2		Q3		Q4			
2013				0.55		0.48		0.54		0.64		
2014				0.67		0.62		0.83		1.12	
2015				1.26		1.15		1.34		1.52
2016				1.60		1.25		1.24		1.47
2017				1.61		1.45		1.57		1.82
2018				2.00		1.64		1.64

Operating Margin (non-GAAP)	Q1		Q2		Q3		Q4
2016						36.8		36.5		38.1
2017				38.8		36.7		37.0		38.5
2018				39.4		36.3		36.3

2018 Q3 Earnings (Current):

Revenue Growth (millions)
2017 Q3 TTM Revenue = 3,502.2
2018 Q3 TTM Revenue = 3,844.2
YOY TTM Revenue Growth =9.8%, previous quarter 14.8%

EPS Growth (non-GAAP)
2017 Q3 TTM Earnings = 6.10
2018 Q3 TTM Earnings = 7.10
YOY TTM EPS Growth = 16.4%, previous quarter 21.8%

Non-GAAP P/E (Check Current Price) = 96.99/7.10 = 13.7

Trailing 1Y PEG = 13.6/16.4 = 0.83

Revenue remains choppy, no doubt, as US/China trade policies have affected the company (think ZTE) and OEM product cycles remain a short-term factor. That being said, the overall long-term trend is definitely upward. While this isn’t a hyper growth story or SAAS, it is a cheaply valued growth stock (IMHO).

A transcript is available on the Fool here: https://www.fool.com/premium/coverage/earnings/call-transcri…

If you took just three to four minutes reading CEO Liam Griffin’s opening comments you would get a good sense of what the company is doing and how that the 5G/IoT thesis is still well intact. Just a little snippet:

Our confidence is underpinned by our product expansion and reach, spanning premier mobile and broad market accounts. For example, during the quarter, we commenced production of access solutions for Cisco; captured content in Linksys new dual-band mesh networks; ramped connectivity engines for Amazon’s 4K Fire TV, a leading voice-enabled streaming media platform; partnered with Sierra Wireless on LTE Cat-12 data cards for M2M applications; deployed networking solutions supporting AT&T/DIRECTV gateways; extended our footprint across Nest home automation platforms; enabled LTE telematics at GM and BMW; and we introduced high-precision GPS functionality, improving ridesharing, mobile payment and fleet management services. We also secured strategic flagship wins at Huawei, Samsung, Oppo, Vivo, LG and Nokia. And in our infrastructure markets, we powered massive MIMO solutions for a leading European base station supplier.

Seriously, if you are a shareholder or considering a position, at least read Griffin’s opening comments. I am still happily holding. Also, as a bonus, the company boosted its dividend by 19%. Nice!

Matt
Long AMZN, SWKS
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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Seriously, if you are a shareholder or considering a position, at least read Griffin’s opening comments. I am still happily holding. Also, as a bonus, the company boosted its dividend by 19%. Nice!

In June 2015, the stock price hit around $110. Less than a year later in 2016, it had dropped all the way down to around $60. It’s at $97 now still well off the highs from 3 years ago. I was in it for the big drop and held on for a while after. I’ve long since sold and have moved on to greener fields. I’ve also stopped following SWKS. While 5G may well become a boon for SWKS, I think there are other ways to play the networking infrastructure upgrade. The problem with SWKS is that it is so dependent on a few large customers. With SWKS it’s also boom and bust. I don’t feel that their destiny is in their own hands and I think that there’s a BIG opportunity cost to owning the shares. What other companies will rise more and faster than SWKS? What other companies are also riding mega trends and are benefiting from them TODAY. With SWKS it seems more about the hope of the future. Just my opinion.

Chris

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Yes, I remember well when it dropped. Fortunately, I was not invested in it at the time. I bought the vast majority of my shares in the $60s and $70s after it dropped and added some earlier this year (late last year?) in the high $90s. I cannot help it if shares were overvalued three years ago. I’m also not sure what that has to do with where shares are headed in the future.

The problem with SWKS is that it is so dependent on a few large customers.

Yes, that is definitely the primary concern with SWKS. But that is also why investors are able to buy shares so cheaply.

What other companies will rise more and faster than SWKS?

I don’t know, but sure wish I did!

What other companies are also riding mega trends and are benefiting from them TODAY.

Well, plenty of course! But I still look at valuations too and try to balance the growth I see versus future expectations and current value. Hopefully, many of the same companies we are invested in will all do well. But just as I thought SWKS shares were overvalued three years ago, I believe some of the companies discussed on the board are overvalued today. I think companies like SWKS make nice counter-balances to these stocks.

It’s a delicate balance that I will almost certainly never perfect. I could certainly be very wrong about SWKS. Hopefully not though :slight_smile:

With SWKS it seems more about the hope of the future.

Isn’t all investing? :slight_smile:

I believe, however, hope in SWKS future is grounded in reasonable assumptions. SWKS will have more content in 5G-capable mobile devices. The IoT is growing, meaning more devices will need components of the type that SWKS makes. It is a company with a history of growing its top and bottom lines, though in a somewhat lumpy manner. I personally believe that at a P/E ratio of under 14, a lot of risk is already priced in. Of course, I’ve been wrong many times before and could be wrong again.

Matt
Long SWKS
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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Chris,
You are right that SWKS is all about hope for the future, but can’t the same be said for investing in a company with SaaS or tech services company exploding revenues, but little or no real earnings. I’m not saying those companies are a bad. I am long SHOP, TWLO, AYX, MDB,and NTNX. But it is kind of the same thing.

As to your point, concentration being a problem, you’re right, it is. I don’t think it’s a horrible problem from a business sense. Margins are solid and trailing PEG = 0.83, but SWKS seems to be perceived as a proxy for Apple, and that’s almost certainly affecting the stock price, for now.

That said, the advent of 5G is just around the corner, and I think there is a strong argument for both great growth, a broadening of the customer base, and a divergence from the Apple story.

I am certainly guilty of missing opportunities by being too stubborn with my stock picks, and I probably was too stubborn with SWKS, but I really do think this is a great time to hop back it. It wouldn’t surprise me if SWKS growth rivals much of the best we see on this board. I realize the dividend is a pittance relative to the growth we’ve seen from the companies on this board, but cash returned to shareholders is a beautiful thing.

Maybe SWKS is not so bad.

Best,

bulwnkl

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Matt,
I didn’t read your post before posting. It looks like we covered a lot of the same ground.

Apologies.

Best,

bulwnkl

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The problem with SWKS is that it is so dependent on a few large customers… I don’t feel that their destiny is in their own hands

I think that what Chris is trying to say here is that most of our companies use S&M to go out and sell small amounts to hundreds of companies, while Skyworks has to just sit and wait for orders to come in, basically from Apple.

That’s a huge difference in my eyes, and beyond that is the fact that for most of our companies the revenue they have this year will recur next year, and more, while Skyworks can do great this year but have revenue flat, or up 10%, or down 20%, next year. No visibility. I used to love Skyworks but once my eyes were opened I wouldn’t touch it with a ten-foot pole. But that’s just me.

Saul

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I held Skyworks up until last Friday. I noted that the price reached as high as about $106 or $107 per share in the after-hours (should have sold then, I guess), but was then around $97.something throughout the morning on July 20th so I cut it loose.

Reasons I sold (2nd, 3rd, and 4th were the biggest reasons):

  • I harvested a very meager tax loss, which will aid in off-setting some realized gains on the year so far.

  • I need to be sure to raise some cash to be ready to exercise some of my MongoDB $55 call options that expire on Aug 17th into shares (then similarly for Pivotal by September 21st).

  • I had gotten up to about 18 positions, which is too many to keep up with (especially if I am also using some options with those positions and a few others).

  • Skyworks hadn’t really gone anywhere since I bought it back in the spring, and was one of only 3 positions that was in the red for me. Nektar and iRobot are my only other 2 remaining losers (of companies I own shares rather than options contracts), and both will likely soon be chopped as well. iRobot may get the axe shortly after their earnings announcement tomorrow afternoon. I may wait around a bit longer with Nektar to allow for the possibility of NKTR-181 FDA approval as a possible positive catalyst.

  • Still not back to greater than double digit revenue growth (although 9.8% is close). On this topic, Skyworks reminds me quite a bit of this post I made last week using Ubiquiti Networks as an example of how it fits into the rules of the board. I see Skyworks as being in a fairly similar situation to Ubiquiti, although Skyworks is larger…maybe more robust, but maybe not with the dependency on supply contracts whereas Ubiquiti provides final products.
    http://discussion.fool.com/monday-morning-rules-of-the-board-331…

For reference, why I lightened my UBNT holdings: http://discussion.fool.com/why-i-lightened-my-ubnt-position-3311…

All that said, I do think Skyworks has a fine future ahead of it, and may even have a few blow-out quarters once 5G starts rolling out in substantial volume. The capital return via buybacks and the dividend is quite nice, as is the sub-1.0 1YPEG. I recall from the prior quarter’s conference call that they expect to get back to consistent 10% revenue growth soon. I don’t anticipate finding time to listen to their conference call from this most recent quarter, but I may manage to peruse a transcript.

I might decide to buy back into a Skyworks position in the future, particularly when the 5G wave seems to be upon us.

-volfan84
For context, Skyworks had been a 2.9% position for me as of the close on Thursday 7/19…MongoDB will likely be between a 4 and 8% position once I exercise call options into shares…Pivotal may become a 9+% position by the time I exercise those call options into shares

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