(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of SWKS.)

The Apple Inc. (AAPL) chipmakers – Broadcom Ltd. (AVGO), Skyworks Solutions Inc. (SWKS), and Qorvo Inc. (QRVO) – have had a rough past couple of weeks, with shares falling dramatically since November 24. But that share decline may be a thing of the past as the three stocks look set to rise based on technical basis, while also getting cheap on a fundamental base. Shares of Qorvo and Skyworks could increase by as much 20%, while Broadcom could advance by nearly 7%. 

AVGO PE Ratio (Forward 1y) Chart

AVGO PE Ratio (Forward 1y) data by YCharts

Skyworks

Shares of Skyworks have fallen to technical support at $94.50, and are starting to rebound. A rise above $99.50 likely triggers a steeper increase in price, perhaps back to $112. But from a fundamental standpoint, valuation has come off sharply, with shares now trading at just 12.3 times forward earnings estimates.

A consensus of analysts are calling for earnings to rise by about 8 percent in fiscal 2019, bringing profits to $7.97 per share. Should the stock return to its previous multiple of about 15, that would make Skyworks worth approximately $120. 

 

 

 

Qorvo

Qorvo has also tested technical support at $65.50, and shares have been trading sideways for most of 2017. But the stock could rise to nearly $80 again before hitting resistance. Qorvo's earnings multiple has fallen sharply as well, back to just 10.50.

Analysts' consensus estimates are expecting earnings to rise by nearly 18 percent in fiscal 2019 to $6.42. Should Qorvo's multiple trade back to around 12.50, it would imply a price of roughly $80, in line with the technical reading. 

 

Broadcom

Broadcom found technical support at approximately $259 and has been able to catch a bounce. Broadcom, like the others, has seen a drop in its stock price. But Broadcom has the least amount of room to rise, as its shares were not battered nearly as severely as shares of Skyworks or Qorvo were.

The consensus estimates are calling for earnings to increase by 5 percent in fiscal 2019 to $20.56. Should Broadcom's multiple expand back to the previous level of nearly 14, shares could be worth $282, an increase of about 6.5 percent from the stock's current price. 

 

 

 

These three chipmakers have been hammered over the past couple of weeks, but if the companies can deliver strong earnings, that presents an opportunity. However, a lot of that success will hinge on the success of the Apple iPhone launch. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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