Here's Why Skyworks Solutions' Stock Fell 11.7% in August

What happened

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.

So what

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.

Closeup on two boxers touching gloves, where one glove is decorated with an American flag and the other carries the Chinese banner.

Skyworks can't wait for this fight to end. Image source: Getty Images.

Now what

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.

10 stocks we like better than Skyworks Solutions
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Skyworks Solutions wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 1, 2019


Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skyworks Solutions. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More