Skyworks Solutions Inc (SWKS), Apple Inc. (AAPL): This Stock Should Spring Back to Life in the Second Half

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It’s been a very turbulent year for Skyworks Solutions Inc (NASDAQ:SWKS). The maker of radio frequency (RF) chips has suffered from some bad luck as it has gained just 10% so far this year, despite posting two solid quarterly reports. The fact that it’s known more as an Apple Inc. (NASDAQ:AAPL) supplier has weighed on its performance and disturbed its momentum. Negative news regarding the iPhone 5 hasn’t gone down well with investors.

Skyworks Solutions Inc (NASDAQ:SWKS)

But, as we enter the second half of the year, which is traditionally a good time for chipmakers who thrive on mobile devices, it would be a good time to take a closer look at the company, especially considering that it is slated to release its third-quarter results on July 18.

On revenue

Analysts, according to Yahoo! Finance, expect Skyworks Solutions Inc (NASDAQ:SWKS) to post revenue of $435.4 million, which would represent an increase of 12% from last year, if achieved. The company shouldn’t have any difficulty meeting this target, as Skyworks Solutions Inc (NASDAQ:SWKS) had itself called for a similar number when it had released its second-quarter results.

The current estimate has been adjusted downward from $444 million, which was originally expected of Skyworks Solutions Inc (NASDAQ:SWKS), but the company had guided below that estimate since the third quarter is usually a slow one for many chipmakers. But despite seasonality, a year-over-year growth of 12% isn’t too bad, and Skyworks Solutions Inc (NASDAQ:SWKS) should perform better going forward, driven by certain catalysts, which I’ll come to later.

On earnings

Analysts expect Skyworks Solutions Inc (NASDAQ:SWKS) to earn $0.53 per share, which is exactly what the company had guided for on its previous conference call. The original earnings outlook was actually a penny lower, but it has been adjusted upward to reflect the company’s guidance. Skyworks has consistently beaten earnings estimates in the past four quarters and we can expect to see the same this time, as the estimate is according to the company’s own comfort.

Moreover, Skyworks stated during the last earnings call that it expected gross margin to improve by 130-180 basis points in the third quarter, and considering this, an earnings beat isn’t a far-fetched fantasy.

On outlook

It is more or less clear that Skyworks would satisfy the estimates, and as such, the outlook (as always) would be of great importance. The company had issued a mixed outlook last time, but this time I expect it to do better.

As far as revenue is concerned, Skyworks should enjoy multiple tailwinds as we move further into the second half of the year, beginning with the next iPhone. It is rumored that Apple Inc. (NASDAQ:AAPL)’s production of the next iPhone has begun, and the company might release it sometime in late September. Now, the next iPhone won’t be the only place where Skyworks should find a spot, since the company has been a regular feature in the previous iPads as well.

The production of the next iPads, especially an iPad mini with a retina display, should be another tailwind for Skyworks. While the iPhone might be maturing, the iPad mini witnessed great demand last year and a retina-toting version should find even more takers. Moreover, the prospect of a cheaper iPhone seems more likely by the day, and if it turns out to be true, both Apple Inc. (NASDAQ:AAPL) and Skyworks will have a big market to tap in emerging nations.

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