Skyworks Solutions Inc Set to Profit From 5G Tailwinds
Skyworks Solutions Inc (NASDAQ:SWKS) is proof that you can’t keep a good 5G stock down. The broader market may be showing signs of sputtering, but Skyworks Solutions stock continues to hold its own, rising 116% year-over-year and 20% year-to-date.
Thanks to its record first-quarter financial results and the proliferation of 5G technology, especially with mobile products, the outlook for this innovator of high-performance analog semiconductors is bullish.
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SWKS Stock Overview
Primarily focused on creating semiconductors for 5G products, Skyworks Solutions’ tagline says it all: “Connecting everyone, and everything, all the time.” (Source: “Connecting Everyone and Everything, All the Time: January 2021,” Skyworks Solutions Inc, last accessed March 31, 2021.)
And thanks to its disruptive mobile and Internet of Things (IoT) technology, the company is uniquely positioned to capitalize on the trillion-dollar connected economy.
Skyworks Solutions Inc is at the forefront of emerging technologies like 5G, which has a direct impact on artificial intelligence, autonomous driving, machine learning, health care, virtual reality, factory robotics, and smart cities.
Skyworks gets the majority of its revenue from 4G- and 5G-enabled mobile products, mostly from a variety of parts that switch, filter, and amplify wireless signals in smartphones.
The rollout of 5G is still in its infancy, and 5G-connected devices are going to become even more complex, making Skyworks Solutions Inc’s expertise even more valuable to device makers.
Thanks to the company’s sheer size, Skyworks is one of the few radio frequency (RF) companies with the scale to supply hundreds of millions of RF products annually.
Some of the company’s major customers are Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOG), Tesla Inc (NASDAQ:TSLA), Toyota Motor Company (NYSE:TM), and Cisco Systems Inc (NASDAQ:CSCO).
Record Q1 Results
For the first quarter of fiscal 2021, ended January 1, 2021, Skyworks Solutions announced that its revenue increased 69% year-over-year and 58% sequentially to $1.5 billion. (Source: “Skyworks Reports Q1 FY21 Results,” Skyworks Solutions Inc, January 28, 2021.)
The company’s first-quarter net income was up 98% at $509.3 million ($3.05 per share). Its adjusted net income per share doubled to $3.36, versus first-quarter 2020 adjusted net income of $1.68 per share. Skyworks Solutions Inc’s operating income was $571.0 million ($3.05 per share), while its adjusted operating income was $622.0 million ($3.36 per share).
“Skyworks delivered all-time record quarterly results, leveraging our expansive technology reach,” said Liam K. Griffin, president and CEO. (Source: Ibid.)
“Demand for our proven solutions continues to accelerate across a growing set of customers and end markets, powering the world’s most impactful use cases, from 5G mobile platforms to IoT, wireless infrastructure, autonomous transport and machine-to-machine installations.”
For the second quarter of 2021, Skyworks Solutions Inc expects to report revenue between $1.13 billion and $1.18 billion, for year-over-year growth of 50%. The company also expects to report adjusted diluted earnings per share of $2.34, representing year-over-year growth of 75%.
Strong Cash Flow Supports Returns to Shareholders
Thanks to above-market revenue growth and strong cash-flow generation, Skyworks Solutions Inc is able to reward buy-and-hold investors with solid dividends and a big share-repurchase program.
In January, along with its record first-quarter results, the company announced a new $2.0-billion stock repurchase program. It also declared a first-quarter dividend of $0.50 per share. At its current price, Skyworks Solutions stock’s dividend yield is 1.1%, with a payout of $2.00 per share.
For passive income investors, the company has raised its quarterly dividend every year since 2014, from $0.11 to $0.50. In 2020, a year that ravaged the global economy, Skyworks raised its quarterly dividend from $0.44 to $0.50. The company has a history of raising its quarterly dividend in the third quarter.
Skyworks Solutions Inc is a leading 5G company with a rock-solid balance sheet that is leveraging its core technologies across multiple markets, from mobile, to IoT, to emerging industries.
Uniquely positioned to capitalize on the immense 5G opportunity, the company expects the continued and rapid adoption of multiple wireless protocols to help drive strong year-over-year growth.
This should help Skyworks Solutions stock climb higher in 2021 and allow it to return capital to investors via dividend growth and its share repurchase program.