U.S. chipmaker Skyworks Solutions Inc. (SWKS) provides high-performance analog semiconductors to large smartphone providers such as Apple Inc. (AAPL). Although the firm has attempted to diversify its revenue streams, entering emerging markets such as virtual reality, augmented reality and the Internet of Things (IoT), analysts continue to link the firm’s success closely with sales of Apple’s iPhone products.

Weakened iPhone Sales in 2017

Analyst Mike Walkley of Canaccord Genuity, who holds a $92 price target on shares of Skyworks, reduced his outlook on the chipmaker’s 2017 financials tied to weakened iPhone sales in March and June quarters of next year, while foreseeing a rebound by the end of 2017, carried by the presumed arrival of an iPhone 8.

“Combined with our lowered iPhone estimates, we also believe smartphone inventory levels are building in China ahead of an earlier Chinese New Year and anticipate weaker sell-in trends during the March quarter and have thus updated our seasonal sales estimates for Skyworks,” wrote Walkley.

The analyst reduced his fiscal 2017 revenue estimate down from previously forecasted $3.55 billion to $3.42 billion. Walkley also slashed his fiscal 2017 earnings per share (EPS) estimate to $5.93, down from $6.21 on a per share basis. On average, analysts foresee FY17 EPS of $6.14 on revenue of $3.52 billion, reflecting 7.2% year-over-year (YOY) sales growth.

Analyst Reiterates Buy Rating

Walkley projects the Woburn, Mass.-based company’s sales to rebound in 2017, indicating YOY sales to Apple “will remain a headwind for growth though C2016.”

The analyst continued, “With improved smartphone inventory, new product production ramps, and ongoing RF TAM [radio frequency total addressable market] growth, we believe Skyworks should return to growth consistent with annual RF TAM market growth during C2017. We believe Skyworks should at least maintain content share in the iPhone 8 and should have better growth trends with more normalized inventory levels leading us to maintain our BUY rating as we believe the shares will appreciate into the iPhone 8 launch likely scheduled for September 2017. (See also: Skyworks’ Q4 Earnings Beats Expectations.)


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