Why Skyworks Solutions Stock Fell 16% Last Month
What happened
Shares of Skyworks Solutions (NASDAQ: SWKS) fell by 16% in November, according to data from S&P Global Market Intelligence, after the company reported fiscal fourth-quarter earnings results. Mounting fears regarding demand for Apple's newest iPhones also likely contributed to the decline.
So what
Revenue in the fourth quarter had hit a record $1 billion, resulting in non-GAAP earnings per share of $1.94. That bottom-line result topped the company's own guidance by $0.03 per share. Non-GAAP gross margin expanded 30 basis points on a sequential basis and came in at 51.2% for the quarter. Fiscal 2018 revenue grew 6% to $3.9 billion, and Skyworks continues to work on 5G wireless technologies.
Image source: Apple.
However, guidance left a bit to be desired, particularly as investors worry that demand for the latest iPhones may be lukewarm. Representing a full 47% of sales last fiscal year, Apple is by far Skyworks' largest customer.
Now what
Skyworks issued a forecast for the fiscal first quarter calling for revenue in the range of $1 billion to $1.02 billion, which should translate into non-GAAP earnings per share of $1.91. Notably, Skyworks pointed to "unit declines in premium smartphones" as a contributing factor in the outlook. Other notable iPhone suppliers have similarly been issuing their own warnings regarding the coming quarter, forming a constellation of data points that is only exacerbating investor sentiment around the Mac maker and its suppliers.
On the earnings call last month, Skyworks CEO Liam Griffin assured analysts that the company's "content position is solid," so it's not that Skyworks is losing design wins at Tier 1 manufacturers to competitors. "So it's not a case where we fumbled and didn't execute or weren't able to win the sockets that we pursued," Griffin added. While Apple has for years been trying to shift a core part of its investing thesis toward its services business, hardware component suppliers don't have that luxury, so the global smartphone market's slowing growth will weigh on those companies' prospects.
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Evan Niu, CFA owns shares of AAPL. The Motley Fool owns shares of and recommends AAPL and Skyworks Solutions. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.
