3. Skyworks Solutions, Inc. (NASDAQ:SWKS)
Forward P/E ratio as of December 15: 9.14
Number of Hedge Fund Holders: 39
Skyworks Solutions, Inc. (NASDAQ:SWKS) is a chipmaker with its main products being power amplifiers, switches, filters, and integrated front-end modules that support wireless transmissions. Skyworks Solutions, Inc. (NASDAQ:SWKS)’s biggest clients include smartphone manufacturers, although the company is also growing in the non-handset markets as well.
On November 15, 2022, Chris Caso, an analyst at Credit Suisse, initiated coverage of Skyworks Solutions, Inc. (NASDAQ:SWKS) with a price target of $125 and an Outperform rating on the stock. The analyst believes that we are close to the bottom of the down cycle, and there is potential for growth from the current price level.
According to Insider Monkey’s database, 39 hedge funds held stakes in Skyworks Solutions, Inc. (NASDAQ:SWKS) at the end of the third quarter ending September 2022. Millennium Management remained the leading stakeholder in the company at the end of Q3 2022.
Heartland Advisors, which owns 119,628 shares of Skyworks Solutions, Inc. (NASDAQ:SWKS) as of June 30, discussed how cheap the stock has become in its Q3 2022 investor letter:
Before the risk-on rebound early in the quarter, we were searching for opportunities to shift from our defensive stance, looking for beaten-down, high-quality “early cycle” leaders. Existing holding, Skyworks Solutions, Inc. (NASDAQ:SWKS), represents one such opportunity that was added to on weakness.
Skyworks is one of two leading providers of radio frequency system components to smartphone makers and electronics manufacturers. With every step-up in product complexity, over the past two decades, the competitive landscape has shrunk while gross margins have increased significantly. 5G represents another such step-up, which is likely to increase how much Skyworks can make per smartphone.
Apple is a big customer, accounting for more than half of Skyworks’ sales. That customer concentration has depressed Skyworks’ valuation over time. More recently, fears surrounding a global recession and risk to consumer demand have further pressured valuation. However, the handset business is expected to benefit from 5G content, which may help offset some macroeconomic pressures. Away from the handset business, Skyworks’ growth is expected to accelerate thanks to other secular drivers such as WIFI 6 and growth of the industrial internet (i.e., “Internet of Things”).
At a P/E of less than eight and a 2.3% dividend yield, SWKS rarely gets this cheap, making this high-quality stock compelling for longterm investors.
