Chipmaker Skyworks Solutions (NASDAQ:SWKS) disappointed investors with lower-than-anticipated guidance for the fiscal third quarter, as macro pressures continue to weigh on the semiconductor space. The company’s fiscal second-quarter results were in line with analysts’ estimates. Shares declined over 8% in Monday’s extended trading session.
Skyworks’ revenue for the second quarter of Fiscal 2023 (ended March 31, 2023) declined about 14% year-over-year to $1.15 billion. The top-line growth was impacted by weakness in demand in the Android ecosystem, with companies continuing to de-stock inventory. Adjusted earnings per share (EPS) fell 23% to $2.02 due to lower revenue and margin contraction.
Skyworks anticipates Q3 FY23 revenue in the range of $1.05 billion to $1.09 billion and adjusted EPS of $1.67 at the midpoint of the revenue outlook range. The guidance fell short of analysts’ expectations of EPS of $2.06 on revenue of $1.15 billion. The company blamed macro challenges, a slower-than-anticipated recovery, and inventory de-stocking, mainly in the Android ecosystem, as the reasons for the weak outlook.
Meanwhile, the company is taking efforts to improve its profitability through operating efficiencies. It expects operating expenses to decline both sequentially and year-over-year and come in the range of $183 million to $187 million in Q3 FY23.
Is Skyworks a Buy, Sell, or Hold?
In reaction to the poor outlook, BMO Capital analyst Ambrish Srivastava downgraded Skyworks Solutions stock to a Hold from Buy and lowered the price target to $100 from $140. The analyst cited multi-quarter headwind to gross margin and elevated inventory levels as the reasons for his downgrade.
Srivastava lowered his FY23 EPS estimate to $8.23 from $9.00 and FY24 EPS estimate to $7.70 from $9.70 due to lower revenue and significantly lower gross margin expectations.
Wall Street is cautiously optimistic on Skyworks, with a Moderate Buy consensus rating based on five Buys and two Holds. The average price target of $127 suggests about 21% upside.
