Edited by Michael Vi/iStock via Getty Images
Smartphone sales have struggled in recent months, with most recent quarter saw an 18% year-on-year decline to just over 300 million units sold worldwide.
However, with the global economy continuing to grow despite Unsettled roads and new smartphone models coming later this year, investment firm KeyBanc Capital Markets believes Skyworks Solutions (NASDAQ:SWKS) should have a “strong” recovery in the second half of the year.
Analyst John Vinh, who has an outsized rating and a $120 a share price target on Skyworks Solutions (SWKS), indicating continued handling of excess inventory for Android (GOOG) (GOOGLE) smartphones, the recovery of sales in China and the potential to increase content in (AAPL) The upcoming iPhone 15 is a positive for Irvine, California-based Skyworks.
“With excess inventory cleared, we anticipate [Skyworks] on track to return to normal quarterly operating pace of $150 million to $200 million for Android China, $100 million in Samsung revenue, and $500 million in Broad Market revenue widely,” Vinh wrote in an investor note, adding that the company could see a content boost of around 10% in the iPhone 15.
If that scenario comes to fruition, chances are Skyworks (SWKS) could generate a revenue ratio of about $1.5 billion in the September quarter, well above KeyBanc’s $1.25 billion estimate and also well above Wall Street’s bullish estimate of $1. 36 billion dollars.
Of course, much of that scenario is built on expectations of a continued recovery in China and hopes that the global economy doesn’t slide into a deep recession. However, recent data from China is “encouraging”, Vinh added, citing January sales figures and the fact that the company’s Android business in the country “is likely to bottoming”.
Last month, Counterpoint Research speak Sales at the beginning of the year increased week by week to reach more than 7 million units the week before the Lunar New Year. In 4 out of 5 weeks, smartphone sales hit over 6 million per week, a level that is “rarely” reached in 2022 as the country deals with the COVID-19 pandemic.
January’s monthly sales were flat from the year-ago period, but up more than 40% sequentially. Probably most important for Skyworks (SWKS), Apple (AAPL) saw iPhone sales in China grow 6% year-on-year at the start of the year.
Some research firms have estimate Sky works (SWKS) get up to 60% of revenue from Apple (AAPL).
While the iPhone 15 may not have a noticeable redesign compared to the iPhone 14, it is possible that the next iPhone will adopt Wi-Fi 6E, expanding on the existing Wi-Fi 6 technology. If yes, Vinh estimates that Skyworks (SWKS) should benefit. If apple (AAPL) chose to skip Wi-Fi 6E and go straight to Wi-Fi 7 on his device, Vinh believes Skyworks (SWKS) would benefit regardless, thanks to the additional 5G spectrum and the “growing complexity” of radio frequency requirements.
In addition to smartphones, Skyworks (SWKS) has been exposed to other areas of electronics, including the internet of things, thanks to the recent acquisition of Silicon Labs (SHEET) Infrastructure & Automotive Franchise, will see revenue growth among “mid-teens” in the long term.
Sky works (SWKS) recently announced a $2 billion buyback program, signaling optimism for its own stock.
