We recently upgraded our recommendation on
Skyworks Solutions Inc.
) to Outperform from Neutral.
Skyworks continues to weather the turbulent economic conditions
well. The company has strategically positioned itself as a
diversified company, and continues to capitalize on three business
segments − mobile Internet, vertical markets and analog components.
The global megatrends of mobile computing and ubiquitous
connectivity continue to be growth engines for Skyworks.
The colossal demand for smartphones continues to drive momentum
for Skyworks, particularly at
). Skyworks has partnerships with all leading smartphone vendors,
) and Samsung. With a diversified customer base, Skyworks is
strongly placed in this market.
The market for smartphones is growing four times the growth rate
of the traditional cellular handset. Management expects smartphone
adoption to gain further traction in the developing countries in
Global adoption of smartphones continues to be robust and is
being rapidly followed by a growing tablet adoption cycle.
Beyond smartphones, growth will be propelled by high
resolution tablets, USB modems, home networks and
yet-to-be-introduced Internet connective devices.
Skyworks continues to benefit from strong underlying demand in
the mobile Internet market driven by market share gains and new
product ramps. Skyworks continues to gain traction on the network
infrastructure side of the mobile Internet connection as operators
install new base stations, new routers, and back-haul equipment to
expand coverage of data services and prepare for next generation
LTE deployments. LTE shipments are expected to grow by leaps and
bounds in 2012.
Meanwhile, estimates have moved down marginally in the last
thirty days even though the company reported in-line results for
the second quarter of 2012, primarily due to the clouded economic
Nevertheless, we believe the growth story remains intact in the
long run and hence we upgrade our recommendation to Outperform from
The stock carries a Zacks #3 Rank currently which translates
into a short-term rating of Hold, owing to the near-term uncertain
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