Shares of mobile communications chipmaker Skyworks Solutions (NASDAQ: SWKS) fell 11.7% in August 2019, according to data from S&P Global Market Intelligence. Skyworks reported third-quarter results in the first week of last month, falling short of analyst expectations that had already been trimmed by slashed guidance figures in June.
Skyworks lowered its third-quarter revenue guidance by 7% in June, when the Trump administration blocked Chinese technology giant Huawei from doing business with American companies. Earnings guidance also took an 11% haircut. Huawei accounted for roughly 12% of Skyworks’ second-quarter revenue, and the government-level sanction cut deeply into this company’s top and bottom lines.
In August, the final revenue and earnings tallies fell slightly below the Wall Street consensus, which had been given roughly two months to adjust to Skyworks’ tougher business landscape. Furthermore, management’s guidance for the rest of this fiscal year fell short of the analyst views at the time.
That was the trigger for Skyworks’ big slide, and share prices continued to sink every time the Chinese-American trade talks suffered another setback.
Skyworks perked up in early September, rising 4.8% as Chinese negotiators started booking flights to Washington for another round of potentially constructive talks. The Huawei sanctions are explicitly not on the table this time, but whatever baby steps the two governments can take toward solving this ugly trade war would be welcome news to Skyworks and its investors.
Skyworks’ stock has suffered a 10% drop over the last 52 weeks and now trades at the eminently reasonable valuation of 15 times trailing earnings. The company remains robustly profitable and prepared to tackle some hard times before swinging back to its usual brand of high-octane growth. Whether that bounce happens later this year or a few more quarters down the road, investors who buy in at these reduced prices should be able to pocket some healthy gains on the eventual upswing.
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