SWKS - Skyworks: Acquisitions Could Be Key To Long-Term Growth

2024-04-21 15:19:54 ET

Summary

• Skyworks Solutions' revenue growth in 2023 deviated from our projections due to underperformance in the Mobile segment.
• The Mobile segment experienced negative growth of 14.4% in 2023, attributed to softness in the smartphone market.
• The Broad Markets segment also saw a decline in revenue growth, but remains poised for long-term growth with strategic restructuring and innovative product introductions.
• We believe acquisitions could play a vital role in sustaining the company's long-term growth with management also indicating interest in pursuing M&A activity.

In our previous analysis of Skyworks Solutions, Inc. ( SWKS ), we highlighted its Broad Markets segment's growth was propelled by fast-growing end markets and believed the company’s Broad Markets would predominantly drive its future growth due to the high-growth end markets like data centers, offsetting stagnant revenue growth in its Mobile segment due to flattish demand for Apple's ( AAPL ) next-gen iPhone, which constituted 59% of Skyworks' revenue.

Nevertheless, Skyworks' revenue growth in 2023 deviated from our earlier projections, as seen in the table below. The primary difference was due to the underperformance of the Mobile segment, which we anticipated to grow by 7.2% but instead experienced a negative growth of 14.4%. Moreover, our 2024 total revenue growth forecast of 6.4% in our previous analysis also deviates from the current analysts’ consensus of -6.55%. Therefore, we examined the underlying reasons for the poor growth performance and outlook. Additionally, we assessed the company’s future growth prospects and determined whether the company’s revenue growth could improve going forward....

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