Shares of semiconductor company Skyworks Solutions (SWKS) fell 7.2% on May 13 to close the trading day at $76.63. Skyworks stock has fallen more than 13% since the start of May 2019. It’s currently trading 27% above its 52-week low of $60.12 and 26.5% below its 52-week high of $104.20. The stock has still gained 15% this year despite falling 7.2% on May 13.
The VanEck Semiconductor ETF (SMH) fell 4.6% yesterday. Peer semiconductor companies Western Digital (WDC), Advanced Micro Devices (AMD), NVIDIA (NVDA), and Analog Devices (ADI) saw falls of 6.2%, 6.2%, 6.1%, and 5.8%, respectively, on May 13.
Skyworks is an Apple chip supplier, and its stock has been affected by weak smartphone sales. Skyworks generates over 70% of its sales from the smartphone vertical. In the third quarter of fiscal 2019, which will end in June 2019, Skyworks expects its revenue to fall 7.7% year-over-year to $825 million at the midpoint, lower than analysts’ consensus estimate of $826.27 million.
This weak guidance dragged the stock down 3% on May 6 as well.
Is Skyworks stock still overvalued?
Skyworks has a forward 2019 PE multiple of 11.4x. In comparison, its EPS are expected to fall 8.2% in 2019. The company’s PE multiple for 2020 is 33.4x, while its EPS are expected to rise 12.2% in 2020.
Will you pay 11 times for negative earnings or 33 times for earnings growth of 12%? Skyworks stock seems overvalued despite the recent fall in its stock price.
Wall Street estimates
Of the 28 analysts tracking Skyworks stock, 22 have given it “buys,” five have given it “holds,” and one has given it a “sell.” The average 12-month target price for Skyworks stands at $99.5, which indicates that Skyworks stock is trading at a discount of 30% to the average target estimate.