Investors Don’t Like the Word “But” (SWKS)

Traders may have flipped the calendar to a new month, but the climate still appears chilly for chip makers reporting financial results. Skyworks Solutions (NASDAQ: SWKS) became the latest company to receive a cold shoulder from investors.

Last night, the mobile phone chip company released its fourth quarter financial results. Revenues for the September-ending quarter amounted to $421.1 million or about $1 million above guidance. The company realized a profit of $0.54 per share, which beat the estimates of Wall Street prognosticators by a penny.

Donald Palette, Chief Financial Officer for Skyworks, said, “Despite the challenging macro economic backdrop, our visibility is strong by new platform ramps, design win momentum, and the depth of our pipeline product.”

Then investors heard the big “but” that sent many scurrying for the exits. For the next quarter, the company guided revenues in line with Wall Street estimates calling for $450.4 million, but profits would be two pennies shy of the consensus view, which looks for $0.56 per share. Cue the orchestra.

When the opening bell rang for the final trading session of the week, the first trade in Skyworks saw share prices gap $1.67 below the closing price on Thursday. A brief rally sent the stock to an intraday high of $22.63 and then it was literally all downhill from that point. Sellers continued to put the hammer down throughout the session. Just before the final hour of the trading week, shares hit their lows of the day when traders exchanged the stock for $19.75, or down more than $4.30 on the day. Investors found little relief on the closing bell as the stock finished the day with a loss of 17% and closed at a price of $19.95. Traders exchanged over 17 million shares during the day, which easily surpassed the six million shares traded on an average day.

Since early September when the stock reached a 52-week high of $31.44, shares of Skyworks have tumbled over 30%. The drop in share prices began after the company updated its guidance for the fourth quarter. The stock hit its annual low last December when traders exchanged shares for $13.74. Boosted by positive guidance comments in January, the stock more than doubled from January through the end of March. Traders might wonder if today’s high volume decline signals more of the same and a return to the yearly lows.

This morning, analysts at Cantor Fitzgerald and Canaccord Genuity reiterated their buy ratings on the stock. A total of 18 research analysts cover the company with all but two recommending the stock as a “buy”. The consensus has a price target of $32.50 on Skyworks shares. For fiscal year 2013, analysts currently expect Skyworks to earn $2.18 per share.

Skyworks Solutions is a supplier of analog and mixed-signal semiconductors. The company offers products that support automotive, broadband, energy management and cellular handset applications. Skyworks Solutions was created in a merger between Alpha Industries and Conexant Systems in 2002. The company is located in Woburn, Massachusetts.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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