I listen to the SWKS conference call. Wow, everything seems to be going in this company’s direction. Here are some highlights (from memory so excuse me if I missed anything):
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Guidance for Q2 is $750M in revenue and $1.12. There is reduced seasonality relative to past years due to diversification of their markets from mobile which has higher seasonality. The said that in future years that the drop from Q1 to Q2 should also continue to be reduced as they expect it will this year.
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They seem China as big this year as many carriers move from 2G and 3G to LTE. I think they said that there will be something like 90 million to 250 million LTE handsets sold in China in 2015. China will continue to be strong and other emerging market countries like India will follow so they see huge numbers of their products being needed.
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They are an integrated provide that includes design and many/most/all of the components needed to control signal receiving and sending. Competitors without a solution to handle design, integration, etc (i.e. they sell components piecemeal) are having an increasingly hard time competing because customer are increasing prefering companies like SWKS that can handle their entire solution. This is enabling SWKS to gain market share and keep margins higher. Also, as chip sets is more complex (LTE is more complex than 3G and 3 G is more complex that 2G) the number of components needed to filter out unwanted signals increases and becomes more complex. There was a recent SA article that went into this.
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SWKS is involved early in the design so they have very good visibility into what their customers want and where the industry is going. This seemed like a hint that the rest of FY 2015 is going to be great (they don’t give guidance by one quarter out). They expect to earn $7 per share in the future…they didn’t give a time frame but I think they could achieve that in FY 2016.
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Dividend is currently 13 cents per share per quarter. Management said they expect to raise it AT LEAST once per year.
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Company is also buying back shares.
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I think they’re on track to hit $5 adjusted EPS in FY 2015 (quarter ending 9/30/2015). This would put the forward P/E at 16. I think they deserve a P/E of at least 25 so I would expect the stock to be worth $125 by November. Whether the stock actually goes there may be another matter.
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Management said that SWKS has one or more components in virtually all mobile phone manufacturers.
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They see the IoT being big.
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$1B in cash and no debt.
In summary, I got the strong impression that everything is going great and that this company is poised for lots of success going forward. This conference call is definitely worth listen to.
Chris