buy pitch for skyworks solutions: boston college investment club
TRANSCRIPT
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Skyworks Solutions(SWKS)Kyle Waters | Jacob Zurita | Campbell BlueFebruary 29, 2016Boston College Investment ClubBuy Pitch
May 3, 2023
Agenda
Company Overview
Investment Thesis
Valuation
Risks
Summary
Questions
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Company Overview
Company Overview
Investment Thesis Valuation Risks Summary Questions
Company Information• Semi-Conductor Industry• Tech• Chip Making/Analog
Semiconductor/ Radio Frequency Control/ Power Amp. Modules
• Wireless Communications Tech.• Competitors: Intel, Linear
Technologies, Analog Devices• Woburn, MA• North America, Japan, Asia,
Europe
Stock Information• Stock Price: 64.90• MKT Cap: 12.44 Billion USD• Dividend in 2015= $0.66/share• P/E: 13.20• P/B: 3.57• EV/EBITDA: 8.50• Beta: 1.28• Industry Averages
• P/E: 24.7• P/B: 3.15• EV/EBITDA: 19.62
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Investment Thesis
Company Overview
Investment Thesis Valuation Risks Summary Questions
Efficiency and Innovation leading to diversified revenue base
Proliferation of the Internet of Things (IoT)
Growing LTE Market, especially in Asian and North American economies
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Applying Innovative Solutions to New Markets
• Flexible and innovative products for solutions to growing demand for powerful components• Major shifts in way individuals view and consume media, music
streaming, video streaming. • Perhaps best play on Netflix that is not Netflix• Adoption of technologies to previously untapped markets• Automotive• Medical• Clean Energy• Wearables
Company Overview
Investment Thesis Valuation Risks Summary Questions
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Appeared Dependency on Apple Inc.• Estimated SWKS receives 30-40% of revenues from Apple• True number remains opaque • High Correlation with AAPL performance (.702)
Company Overview
Investment Thesis Valuation Risks Summary Questions
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Appeared Dependency on Apple Inc.• Skyworks increasingly reducing dependence on Apple• Agnostic to brand, scalable on any cellular OEM platform • Supports all top-tier manufacturers • Non-cellular revenues surpassed 25% of total revenues in 2015
• Skyworks well-positioned to remain a major supplier for Apple• Stalwart of consumer technology, provides stability for Skyworks• Recently hinted that Skyworks’ products may have a larger dollar
value of total components in upcoming iPhone 7
Company Overview
Investment Thesis Valuation Risks Summary Questions
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IoT: Wireless Connectivity of people, places and things
• Connecting everyday devices requires reliable, powerful and innovative communication technology• Skyworks’ highly innovative systems are scalable on virtually any
platform • SWKS best positioned to innovate and capture this growing market• Connected home, connected car, major customers include: NEST,
Honeywell, Bose, GM, FCAU • Major Innovations to capitalize on IoT: • Industry-leading RF switches with analog control ICs for IoT applications
such as connected home and smart lighting in homes
Company Overview
Investment Thesis Valuation Risks Summary Questions
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IoT: Wireless Connectivity of people, places and things
Company Overview
Investment Thesis Valuation Risks Summary Questions
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LTE Market Poised to Expand Worldwide
• Growth of smart phone market worldwide, especially in Asia• Over 80% of the Chinese population are on 2G or 3G, expansion to
4G LTE will explode in next few years• Growth of LTE will require innovations in data capacity, Skyworks is
leader in this technology• Released world’s first solution optimized for LTE category M Applications• Next Gen diversity receive modules, maximize LTE data throughput, help
mobile communications deliver increasing amounts of data • Chinese consumer appears to still be on track to upgrade to 4G• OEM share shifts do not matter to Skyworks, relationships with all
suppliers• LTE dropping in price faster vs. 3G
Company Overview
Investment Thesis Valuation Risks Summary Questions
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LTE Market Poised to Expand Worldwide
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Valuation• Price Target from Barclays Equity Research – $88• Looks cheap vs. Major Comps• Market severely discounting SWKS for appeared reliance on
Chinese economy, Apple products• YoY revenue growth guidance from management: “high single digits
in next five years”
Company Overview
Investment Thesis Valuation Risks Summary Questions
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DCF
Company Overview
Investment Thesis Valuation Risks Summary Questions
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Comparison with Industry Leaders
Company Overview
Investment Thesis Valuation Risks Summary Questions
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Risks – Skyworks Specific• Relatively low R&D spending could impair Skyworks’
Competitive Edge vs. Peers• Increased competition could lead to a failure to secure deals
from major customers • E.g. Intel gets deal with Apple on iPhone 7
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Company Overview
Investment Thesis Valuation Risks Summary Questions
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Risks – Macro • Lower than expected rate of phone replacement in developed
economies• Consumers could be content with current generation smart phones
• Slowdown in emerging markets could sap demand for consumer electronics and smart phones which utilize SWKS components • Worries centered on recent troubles in Chinese economy• 20-25% of revenues from China
• Crowded Trade?• 25 analysts following SWKS: 24 “BUY rating,” 1 “Hold rating,” 0 “Sell”• Wall Street Darling
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Company Overview
Investment Thesis Valuation Risks Summary Questions
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Summary
Company Overview
Investment Thesis Valuation Risks Summary Questions
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Efficiency and innovation leading to diversified revenue base
Proliferation of the Internet of Things
Growing LTE market: especially in Asian and North American economies
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Questions?
Company Overview
Investment Thesis Valuation Risks Summary Questions
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Appendix
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