What Happened?
Shares of wireless chips maker Skyworks Solutions (NASDAQ: SWKS) fell 30% in the pre-market session after the company reported underwhelming fourth-quarter results and announced it lost some of its business with its largest customer, Apple. Sales came in roughly in line with Wall Street expectations but declined 11.1% year-on-year. SWKS confirmed a significant loss of business in the upcoming iPhone 17 cycle, as management disclosed that the company will be dual-sourced for the iPhone 17 DRX socket, which translates to a significant share loss in Apple's next-generation devices.
On the other hand, inventory levels improved. In addition, its revenue guidance for next quarter came in much higher than Wall Street's estimates. Overall, we think this was still a disappointing quarter, with markets likely worried about weak growth and lost business.
Separately, CEO Liam Griffin will step down, with Inseego Executive Chairman Philip Brace set to take over on February 17, 2025.
Following the earnings report, Stifel downgraded the stock to "Hold," citing the lost business with Apple. The firm noted that Apple has shifted to a dual-sourcing strategy—likely bringing in Broadcom—on a key component that was previously exclusive to SWKS.
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What The Market Is Telling Us
Skyworks Solutions’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for Skyworks Solutions and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 14.9% on the news that the company reported weak first quarter results: its free cash flow missed, and its revenue and EPS guidance for the next quarter fell short of analysts' expectations. Management attributed the weaker outlook to an anticipated decline in its mobile business as it cleared its excess inventory.
A silver lining was that the company announced a dividend of $0.68 per share. Overall, this was a tough quarter for Skyworks Solutions.
Following the results, TD Cowen analyst downgraded the stock's rating from Buy to Hold and lowered the price target from $125 to $90. The analyst added "We remain encouraged at Skyworks' efforts to strategically position the business following a difficult recent macro environment, yet see an approximately 10% loss that may or may not be temporary as too much to overcome."
Skyworks Solutions is down 25% since the beginning of the year, and at $66.35 per share, it is trading 45% below its 52-week high of $120.68 from July 2024. Investors who bought $1,000 worth of Skyworks Solutions’s shares 5 years ago would now be looking at an investment worth $563.82.
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