Hi Everybody,
Skyworks had a pretty good quarter, although not nearly as good as we’ve been accustomed to during the iPhone 6 introduction.
I’d like to provide some data and a few thoughts.
QoQ revenues are down again, this time about 5%. Nobody likes seeing revenues going down. But the unspoken culprit is most likely the muted growth in the Apple business (they refer to the largest customer in the calls). And they don’t expect QoQ growth to be positive until the 2nd fiscal quarter (next quarter). The table below shows the historical data as well as the company’s outlook for this quarter.
Rev Mar Jun Sep Dec
2012 364.7 389.0 421.1 453.7
2013 425.0 436.1 477.0 505.2
2014 481.0 587.0 718.2 805.5
2015 762.1 810.0 880.8 926.8
2016 775.1 751.7 835.4 **902.2**
YoY Mar Jun Sep Dec
2012
2013 16.5% 12.1% 13.3% 11.4%
2014 13.2% 34.6% 50.6% 59.4%
2015 58.4% 38.0% 22.6% 15.1%
2016 1.7% -7.2% -5.2% **-2.7%**
Adjusted QoQ earnings are now down for consecutive quarters for as long as I have data (I didn’t go back beyond 2012).
AEarn Mar Jun Sep Dec AEQ/Q Mar Jun Sep Dec
2012 79.8 86.1 103.5 106.6 2012
2013 91.9 103.8 121.2 127.7 2013 15.2% 20.6% 17.1% 19.8%
2014 118.6 160.8 216.1 244.8 2014 29.1% 54.9% 78.3% 91.7%
2015 224.6 262.5 296.1 311.2 2015 89.4% 63.2% 37.0% 27.1%
2016 242.3 238.1 277.6 2016 7.9% -9.3% -6.2%
AEPS Mar Jun Sep Dec AEPSQ/Q Mar Jun Sep Dec
2012 0.42 0.45 0.53 0.55 2012
2013 0.48 0.54 0.64 0.67 2013 14.3% 20.0% 20.8% 21.8%
2014 0.62 0.83 1.12 1.26 2014 29.2% 53.7% 75.0% 88.1%
2015 1.15 1.34 1.52 1.60 2015 85.5% 61.4% 35.7% 27.0%
2016 1.25 1.24 1.47 **1.58** 2016 8.7% -7.5% -3.3% **-1.3%**
**Bold** is the outlook.
It may seem obvious, but this is why the stock price is pretty range-bound over the past few quarters, having been under a P/E of 16 for the past four quarters. The P/E today is about 13.7, and the low over the last four periods has been 9.5.
Quarter AEPS QoQGr TTMEPS TTMGr Hi Lo Close P/E P/E Hi P/E Lo 1YrPeg
Mar-12 0.42 $29.01 $16.48 $27.65
Jun-12 0.45 $29.09 $23.11 $27.32
Sep-12 0.53 $31.44 $22.36 $23.56
Dec-12 0.55 1.95 $24.45 $19.21 $20.30 10.4 12.5 9.9
Mar-13 0.48 14.3% 2.01 $25.10 $20.25 $22.03 11.0 12.5 10.1
Jun-13 0.54 20.0% 2.10 $24.58 $19.57 $21.89 10.4 11.7 9.3
Sep-13 0.64 20.8% 2.21 $26.46 $20.95 $24.84 11.2 12.0 9.5
Dec-13 0.67 21.8% 2.33 19.5% $28.64 $23.27 $28.56 12.3 12.3 10.0 0.63
Mar-14 0.62 29.2% 2.47 22.9% $39.34 $27.20 $37.52 15.2 15.9 11.0 0.66
Jun-14 0.83 53.7% 2.76 31.4% $49.10 $34.30 $46.96 17.0 17.8 12.4 0.54
Sep-14 1.12 75.0% 3.24 46.6% $59.25 $45.50 $58.05 17.9 18.3 14.0 0.38
Dec-14 1.26 88.1% 3.83 64.4% $74.97 $44.06 $72.71 19.0 19.6 11.5 0.29
Mar-15 1.15 85.5% 4.36 76.5% $102.77 $68.71 $98.29 22.5 23.6 15.8 0.29
Jun-15 1.34 61.4% 4.87 76.4% $112.88 $90.68 $105.74 21.7 23.2 18.6 0.28
Sep-15 1.52 35.7% 5.27 62.7% $106.74 $70.80 $84.21 16.0 20.3 13.4 0.26
Dec-15 1.60 27.0% 5.61 46.5% $88.52 $73.65 $76.83 13.7 15.8 13.1 0.29
Mar-16 1.25 8.7% 5.71 31.0% $78.29 $54.50 $77.90 13.6 13.7 9.5 0.44
Jun-16 1.24 -7.5% 5.61 15.2% $78.46 $57.11 $63.28 11.3 14.0 10.2 0.74
Sep-16 1.47 -3.3% 5.56 5.5% $77.88 $57.19 $76.14 13.7 14.0 10.3 2.49
============================================================================================
**Dec-16 1.58 -1.3% 5.54 -1.2% $130.58 $63.73 $76.14 13.7 23.6 9.5 -11.01**
*This last line shows the company's outlook and value range using the high and low P/E range over the last 8 quarters, assuming they hit*
*their guidance.*
Sales comps are expected to turn positive in the March quarter. From the conference call: With respect to year-over-year comps, we’re confident that we will be up on a year-over-year basis in Q2, fiscal Q2.
This, tempered by the fact that they “expect gross margin in the low 51% range” this quarter, which is a sequential decrease, may not help us to break out of the valuation range for a little while.
Here are the historical figures. Recall that they’ve been telling us about incremental 55% margins pilling up the gross margins over time. It looks like there is a pause with this progress.
Adj GM Mar Jun Sep Dec
2012 43.2% 43.2% 42.9% 43.0%
2013 42.2% 44.0% 44.4% 44.5%
2014 44.7% 45.4% 45.9% 46.7%
2015 46.7% 49.0% 50.0% 51.4%
2016 50.8% 50.9% 51.8% **51.?%**
The balance sheet looks really good (sorry about the missing data points). But this could change if they go after Microsemi, the company that won the bidding for PMC-Sierra.
http://www.investopedia.com/news/microsemi-targeted-skyworks…
Well, the historical valuation is on the low end, we’ll be coming out of a period of negative comps as toppling growth improves. The business is executing really well, getting more content in the larger phone manufacturers and continue making progress in other business areas.
- Leveraged SkyOne® across Huawei's Honor 8 global platform
- Powered Google's flagship Pixel 4G LTE smartphones
- Secured multiple 4G LTE design wins with leading Chinese OEMs including Asus, Gionee, HTC, Meizu, Oppo, Xiaomi and ZTE
- Commenced volume production of diversity receive and antenna tuner solutions
- Supported Amazon's Echo and Tap virtual assistant devices
- Enabled Netgear's Orbi router with connectivity and analog control ICs
- Launched linear power amplifiers in support of small cell ramps in China
- Delivered integrated 4G LTE modules for Jaguar and Land Rover automobiles
- Ramped vehicle-to-vehicle communication modules for Alps
- Captured ZigBee® content in Trilliant's smart grid communication systems
- Designed into a premier medical imaging OEM for MRI applications
- Integrated GPS, connectivity and switching solutions for GoPro drones
For companies such as Skyworks that could get hammered as soon as they get disrupted out of their business, low valuations are normal. But there are times, for a quarter or two, when really good companies have a nice spike in business and resulting earnings that cause the stock to get valued at the high end of the value range.
As Skyworks is collaborating with its customers with long lead times, I wonder what this would mean if the Apple faithful go nuts for the iPhone 8 next year.
Regardless, the valuation is pretty good, the prospect for growth are growing and a spike in such growth may get enough buying to move us up in the range.
DJ
