Catalyst:
Skyworks Solutions claims to be at the center of 5G and the IoT. This may sound like an overstatement but the fact that they make an essential semiconductor chip for Apple and its main hardware competitor, Samsung, makes it not so farfetched. About 50% of their sales come from Apple and they are trying to diversify away from the company. Having too much exposure to a single company can be risky if Apple chooses to make their own chip or chooses another supplier.
According to the Skyworks Solutions, they make $18 for every 4G chip, with 5G, they are going to make $25 per chip. Assuming they keep the same profit margins, this will be an increase of about 40% in profits per chip. Qualcomm estimates that over 650 million 5G smartphones will be shipped in 2022 and that by 2025, there will be about 2.8 billion devices. If Skywork Solutions can have even 40-50% of this market, it will bring considerable revenues and profits to them.
Financial Analysis:
In the fourth quarter of 2020, Skyworks Solutions delivered $957 Million in revenues, up 30% Sequentially and 16% YoY. Net income was $246.1 million, an increase of 17% from the same quarter last year. For the FY20, total revenues were $3.35 billion, about the same as last year and net income fell by about 5% to $814.8 million.
On the balance sheet, Skyworks Solutions remain one of the few big public companies without any debt. The total cash position of Skyworks Solutions is $980 million with $5.1 billion in total assets. Total liabilities are about a billion dollars and the book value is $4.1 billion.
Read the full analysis along with the Valuations on my Research Partnership: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/26937366
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