Of course, everything isn’t peachy in the Empire of Apple lately. The price of supplying Apple with the pieces it needs appears to be on the rise, as Skyworks just hasn’t produced the bottom-line (or free cash flow) growth investors had been expecting. This appears to be a growing trend in the industry, since RF Micro Devices, Inc. (NASDAQ:RFMD) and TriQuint Semiconductor (NASDAQ:TQNT) both endured worse profit slides than Skyworks in the iPhone launch quarter.
However, when it comes to long-term potential, Skyworks might have these two competitors beat. Sean Williams points out that RF Micro remains more dependent on producing components for the outdated (and thus ultimately doomed) 2G/3G wireless standards, and TriQuint just doesn’t have the same production capabilities as Skyworks has to muster big orders in small timeframes. Skyworks is certainly more profitable than either, as it’s the only one of the three to boast a positive P/E ratio.
Investing in Skyworks today seems to be a statement of belief in Apple, since the two companies are so closely aligned. Although a bit less than 30% of Skyworks’ sales go toward building Apple products, that’s still a huge amount of dependence on one company that — let’s face it — has settled into producing iterative upgrades to its moneymakers for the last three years. Should consumer habits shift, Skyworks might be left out in the cold.
Putting the pieces together
Today, Skyworks has many of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy — or to stay away from a stock that’s going nowhere.
The article Is Skyworks Solutions Destined for Greatness? originally appeared on Fool.com and is written by Alex Planes.
Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight, and occasional attempts at comedy.The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and TriQuint Semiconductor.
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