SWKS Historical Valuations

I mentioned earlier that I’m adding tools to 1ypeg.com to help foster accuracy, and I have early versions of those tools built now (still rough around the edges, so not publicly available yet). In any case, here are some interesting things about SWKS. One cautionary note, first: I’m still testing out these tools, so inaccuracies are possible. But with that out of the way:

The adjusted P/E right now is around 13.3. Over the past 3 years, SWKS has closed above an adjusted P/E of 13 on 66% of market days, and above an adjusted P/E of 11 on 92% of market days. Over the past 2 years, it has closed above an adjusted P/E of 13 on 98% of market days.

So over a recent (3 year) history, an adjusted P/E of 11 seems like a rock-bottom valuation. Over 2 years, today’s P/E is rock bottom. If management’s estimate of $8 adjusted EPS over the next 6-8 quarters is in the ballpark (and to put that into context, it’d require around 23% annualized EPS growth from here, whereas they’ve been doing 60%+), that means two years from now a P/E of 11 would translate into a price of around $88/share, which is about 25% upside from today’s prices. And if the market awards the company today’s P/E of 13, that’d be $104/share or 48% upside. At a P/E of 17 – which the company has closed above on 47% of market days over the past 3 years, so certainly not outrageous – the price would be $136, with 95% upside potential.

Stepping back to the business, I don’t understand at all why the stock has been falling based on these Apple rumors. Even if the rumors are true, they’re only about a single model of phone (the 6S), but SWKS makes money regardless of the Apple model of phone being sold, or even if business is going to a major competitor of Apple. Skyworks might make a little less money per phone, but if people are still buying phones then the company is going to do just fine. And I don’t see any reason why people would stop buying phones all of a sudden – even if this quarter shows a dip, my guess is that it will simply translate into higher demand later in the year.

And that’s just phones. As I’ve said before, I think a long-term investment in Skyworks goes beyond phones.

My own conclusion is that SWKS is an excellent long-term value right now. It could go lower based on historical ranges (a P/E of 11 would put the stock around $58), but we’re at the bottom 1/3 of valuation bands over the past 3 years, and at the bottom 2% over the past 2 years according to my figures. I just don’t think it’s likely that the business has been altered so radically over the past few months.

I personally added to my already overweight position today.

Just my 2 cents, of course! Please do your own due diligence.



nevercontent: Stepping back to the business, I don’t understand at all why the stock has been falling based on these Apple rumors.

The drop yesterday and today doesn’t bother me at all; that’s just FUD. What I’m at a loss to explain is why the stock price has been in decline since last summer.


What I’m at a loss to explain is why the stock price has been in decline since last summer.

Hopefully just market irrationality and a currently out-of-favor supplier to an out-of-favor Apple.

If the company can continue performing longer than the market can be irrational, the price will go up. Of course there’s no telling how long that could take.

Disclosure: I bought some more today.

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I assume the answer is a simple one: that purchases of new phones are mostly discretionary and if money is tight (because the economy is in trouble and your job may be at risk) the old phone, scratched screen and held together with tape, will do perfectly well.

The drop yesterday and today doesn’t bother me at all; that’s just FUD. What I’m at a loss to explain is why the stock price has been in decline since last summer.

Remember all those China worries and reports that SWKS had something like 80+% of its business in China (a false claim).


but then there is this chart which can scare the faint of heart



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obviously the link didnt work well. Just go to finance.yahoo.com and look at the max period (which is as of 1984).

An article about a conversation with the CEO today at CES:


With shares of wireless chip maker Skyworks Solutions (SWKS) down today on worries over rumored cuts in Apple‘s (AAPL) iPhone production, chief executive David Aldrich was kind enough to talk with me for a few minutes on show floor at the Consumer Electronics Show in Vegas.

Unprompted by me, Aldrich offered that “with what’s going on this week, with our stock down, what always helps us is that we are not just in any one vendor’s product, we are in all the OEMs,” meaning the company’s RF “front end module,” which includes the power amplifier but increasingly things such as power management chips that make up as much as a third of what Skyworks gets from some products.

Aldrich said that diversity by customer allows the company ultimately stay aloft as individual vendors of phone or tablet lines hit a rough patch. “And also, and I will commit to investors, and to your readers, with each new generation of these things,” he picked up a phone siting on the conference table, “we will get a higher share of the content in them” by building more and more components within a so-called multi-chip module.



Excellent article wouter. The CEO also talked about diversification into other channels in the IoT space. The stuff that’s popping up into everything in life.

That non-mobile stuff makes up a fifth to a quarter of revenue today but is projected by Aldrich to grow annually at a rate of 20% or better. Being in mobile helps to build the expertise to do that, something they has put the company far along the learning curve of integrating wireless and analog parts.


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An article from Barrons about a conversation with the CEO of SWKS today at CES:

Hi Wouter, that was a great, great, find, at a crucial moment! Thanks very much!



I would caution trying to baseline decisions on a short 3 year history; especially when the last 3 years have seen a tremendous bull run in the market.

Your argument on valuation is based on a lot of positives breaking; it would be interesting to see if things didn’t work out. For example what if they started facing more competition and margins were hit:


What if earnings stayed flat for a couple of years; and/or if the market went into a bear cycle? Then you might be looking at a share price under $40.00


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AMBA has never recovered since QCOM announced coming into their space.
This competitive intrusion on SKWK’s turf combined with negative AAPL sentiment likely will cast a pall on SWKS shares until earning imo.