Skyworks Stock Lower Despite Earnings Beat

Apple supplier SWKS reversed pre-market gains

by Patrick Martin

Published on Jul 20, 2018 at 10:18 AM

Skyworks Solutions Inc (NASDAQ:SWKS) stock is down 4.8% to trade at $97.65, despite the Apple supplier reporting fiscal third-quarter earnings and revenue that exceeded analyst expectations. The earnings beat and the company's upbeat guidance are likely being overshadowed by escalating trade tensions with China, after President Donald Trump this morning threatened increased tariffs on virtually all imported Chinese goods.

In response to the upbeat results, no fewer than seven brokerages issued price-target hikes on SWKS stock, including Craig-Hallum, to $120 from $115. Loop Capital reiterated a "buy" rating, saying Skyworks' "results, outlook, and commentary are a solid indicator the smartphone supply chain has returned to a level of normalcy that should help bring investors back to the group." D.A. Davidson bucked the bullish bias and slashed its price target to $125 from $130. 

After falling to an annual low of $86.13 on April 30 -- not long after the U.S. imposed a ban on China's ZTE (now lifted) -- Skyworks stock had rallied more than 18%, as of yesterday's close. However, the shares' upward momentum has stalled in the face of their 320-day moving average, which contained SWKS' rebound attempts in June. Skyworks stock is now on track to snap its four-day winning streak.

Skepticism had been rampant in the options pits ahead of earnings. The stock's 10-day put/call volume ratio of 1.39 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 76th annual percentile -- meaning SWKS puts were bought to open relative to calls at a quicker-than-usual clip in the past two weeks.

Shifting gears to today, options volume has exploded. Roughly 6,900 calls have been exchanged in the first hour of trading -- 13 times the intraday average. Most active is the August 105 and 100 calls, though it seems traders may be liquidating their now out-of-the-money options.

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