Hybrid employee organizational structures, cloud services and Internet of Things (IoT) devices used by various businesses reveal the growth potential of 5G. To expand the country’s 5G base, President Biden has proposed $50 billion funding for the U.S. semiconductor industry as part of his $2 trillion infrastructure spending proposal. This follows the President’s executive order, passed two months ago, to review the nation’s semiconductor shortage.
Various companies have begun to manufacture 5G-supported devices to capitalize on this industry tailwind, leading to a shortage of semiconductor chips worldwide. In addition, U.S.-China trade tensions are forcing Taiwan Semiconductor Manufacturing Company (TSM), a Taiwanese multinational semiconductor manufacturing and design company, to build factories in both countries. Consequently, the global 5G services market size is expected to grow at a CAGR of 46.2% over the next seven years to hit $664.75 billion by 2028.
In light of these developments, Skyworks Solutions, Inc. (SWKS), Qorvo, Inc. (QRVO), and Cirrus Logic, Inc. (CRUS) are expected to generate significant revenues in this quarter. Thus, we think it could be wise to invest in these stocks now.
Click here to checkout our 5G Industry Report for 2021
Skyworks Solutions, Inc. (SWKS)
Founded in 1962, SWKS designs, develops, manufactures and markets semiconductor products. The company provides products for use in the aerospace, automotive, broadband, cellular infrastructure, connected home, entertainment and gaming, industrial, medical, military, and wearable markets. It sells its products through a direct sales force, electronic component distributors, and independent sales representatives.
SWKS is scheduled to repurchase up to $2 billion of its common stock in increments prior to January 26, 2023. On January 14, the company collaborated with Xilinx, Inc. (XLNX) to showcase the spectral and power efficiency achievable using its SKY66318-21 power amplifier in 5G infrastructure applications. Also in January, SWKS announced that its high-performance Wi-Fi 6E front-end modules were featured on the world’s first ultra-fast Wi-Fi 6E gaming router from ASUS.
For its fiscal year 2021 first quarter (ended January 1, 2021), SWKS’ net revenue increased 68.5% year-over-year to $1.51 billion. Its non-GAAP gross profit has increased 71.8% year-over-year to $771 million. The company’s non-GAAP operating income came in at $622 million for the quarter, up 97.2% year-over-year. Its non-GAAP net income of $560.50 million represents a 94.2% rise year-over-year. Also, SWKS’ non-GAAP EPS has increased 100% year-over-year to $3.36.
Analysts expect SWKS’ EPS to improve 68% year-over-year for the current quarter, ending June 30, 2021, to $2.10. It impressively surpassed the Street’s EPS estimates in each of the trailing four quarters. Also, the consensus revenue estimate of $4.92 billion for its fiscal year 2021 represents a 46.5% rise on a year-over-year basis.
The stock has gained 96.3% over the past year and closed yesterday’s trading session at $187.84.
SWKS’ strong fundamentals are reflected in its POWR Ratings. The stock has a B overall rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock also has a B grade for Momentum and Quality. We have also graded SWKS for Growth, Value, Stability, and Sentiment. Click here to access all of SWKS’ ratings.
SWKS is ranked #19 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
Qorvo, Inc. (QRVO)
QRVO develops and commercializes technologies and products and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications worldwide. Its Mobile Product segment supplies RF solutions that perform various functions in the cellular radio front-end section of smartphones. The IDP segment-supplied RF solutions supports ubiquitous high-speed network connectivity to the cloud, data center communications, and upgraded military capabilities around the globe.
Last month, QRVO increased shipments of its RF Fusion20 portfolio to all major 5G smartphone manufacturers. QRVO introduced its first QPG6100 smart home communications controller on March 22 to deliver simultaneous support for multiple ultra-low power wireless protocols. And on March 5, NASA’s Jet Propulsion Laboratory (JPL) confirmed that QRVO’s products were integrated into the Mars Perseverance’s critical descent stage landing radar. In February, QRVO introduced a family of compact Quadrature IF Mixers that address the needs of wideband and high frequency applications.
QRVO’s revenue was $1.09 billion for the fiscal year 2021 third quarter, ended January 2, 2021, which represents an improvement of 26% year-over-year. Its gross profit was $299.20 million, up 95.5% year-over-year. While its non-GAAP operating income was $401.36 million, representing a 59% rise year-over-year, its non-GAAP net income was $356.69 million, up 61.5% year-over-year. Also, the company’s EPS increased 65.6% year-over-year to $3.08.
A consensus EPS estimate of $2.16 for the current quarter, ending June 30, 2021, represents a 44% rise year-over-year. QRVO also surpassed the consensus EPS estimates in each of the trailing four quarters. Its consensus revenue estimate of $3.98 billion for the current fiscal 2021 represents a 23% rise from the prior year period.
The stock has rallied 111.3% over the past year and 68.6% over the past nine months. It closed yesterday’s trading session at $189.85.
QRVO’s POWR Ratings reflect this promising outlook. The stock has a B overall rating which equates to Buy in our POWR Ratings system.
The stock has an A grade for Growth and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see QRVO’s ratings for Momentum, Stability, Value, and Sentiment here.
QRVO is ranked #23 in the same industry.
(Note that QRVO is one of the current stocks in Jaimini Desai’s POWR Growth portfolio. Learn more here.)
Cirrus Logic, Inc. (CRUS)
CRUS provides integrated circuits (ICs) for audio and voice signal processing applications. The company offers two product lines: Portable Audio, and Non-Portable Audio, and Other. The company provides its portable products for use in smartphones, tablets, digital headsets and wearables. Its non-portable audio and other products include analog and mixed-signal components that target the consumer market, including smart home applications and the automotive, energy and industrial markets.
Sponsored by CRUS, SAR Insight & Consulting, through a global survey, concluded that consumers are using smartphone speakers to watch and share video via social media, participate in video calls and listen to podcasts or music while multitasking. In response, CRUS introduced its newest flagship CS35L45 boosted amplifier on March 24, 2021. It will provide a richer, more immersive audio experience from smartphones, tablets and mobile gaming devices.
The company’s net sales have increased 29.7% year-over-year to $485.80 million for the fiscal 2021 third quarter, ended December 26, 2021. CRUS’ non-GAAP gross profit was $251.74 million, which represents a 27.3% improvement year-over-year. Its non-GAAP operating income was $145.94 million, up 54.2% year-over-year. CRUS’ non-GAAP net income has also increased 49.3% year-over-year to $127.76 million for the quarter. Also, CRUS’ non-GAAP EPS has increased 51.1% year-over-year to $2.13.
Analysts expect CRUS’ EPS for the current quarter, ending June 30, 2021, to be $0.60, up 15.8% year-over-year. It’s earnings surprise history looks impressive; the company has surpassed the consensus EPS estimate in each of the trailing four quarters. Also, for its fiscal year 2021, analysts expect CRUS’ revenue to be $1.38 billion, representing a 7.6% rise from the prior-year period.
The stock has gained 21.5% over the past year and 29.1% over the past nine months to close yesterday’s trading session at $84.06. It has gained 52% since hitting its 52-week low of $55.30.
It’s no surprise that CRUS has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Value, and a B grade for Growth, Sentiment, Momentum, and Quality. Click here to see the additional POWR Ratings for CRUS’ Stability.
CRUS is ranked #2 in the same industry.
Click here to checkout our 5G Industry Report for 2021
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SWKS shares were trading at $190.65 per share on Thursday afternoon, up $2.81 (+1.50%). Year-to-date, SWKS has gained 25.04%, versus a 11.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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