As I mentioned earlier, Skyworks isn’t just dependent on Apple Inc. (NASDAQ:AAPL). The company also supplied content for the Samsung Electronics Co., Ltd. (KRX:005930) Galaxy S4, and this is what impresses me since Skyworks is usually positioned to hitch a ride with only the most popular mobile devices, ranging from an iPhone to a Galaxy to an iPad.
But, apart from these bellwethers, Skyworks is also expected to benefit from the booming Chinese smartphone market as more of the country’s customers switch to smartphones. A significant number of consumers in China are switching to 3G devices, and the fact that Skyworks has relationships with the important players in the market (such as ZTEST Electronics Inc. (CVE:ZTE), Lenovo Group Limited (ADR) (OTCMKTS:LNVGY), and Huawei Technology Co Ltd (SHE:002502)) should help its prospects further. Moreover, the 3G content carries a higher margin, which should help Skyworks further improve its earnings.
Skyworks’ solutions enable connectivity, and the proliferation of connected devices should expand the company’s playing field further. The popularity and prevalence of internet-connected homes and cars continues to increase, and as these trends catch on further, a company like Skyworks should do better.
Thus, I would expect a solid outlook from the company, driven by the ramp up in production by Apple Inc. (NASDAQ:AAPL) and the growth in the Chinese smartphone market. However, the fact that the company is well-positioned to profit from a more connected world makes it a good long-term bet as well.
The bottom line
Skyworks has had a rocky ride this year, but the company is not at fault. If you eliminate the noise, Skyworks is a debt-free company with decent amount of cash on the balance sheet and trades at just 9 times forward earnings with a PEG ratio of just 0.61. Thus, if you own Skyworks shares and are frustrated with the non-performance, don’t be, since the company’s business and prospects look strong.
The company’s upcoming earnings report should give us greater clarity, so be sure to check this space in a few days for the complete analysis of Skyworks’ results.
The article This Stock Should Spring Back to Life in the Second Half originally appeared on Fool.com is written by Harsh Chauhan.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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