This Company is a ‘Triple Threat’ Stock Investment
Skyworks Solutions Inc (SWKS) is an Irvine, CA company that develops semiconductor products that has a broad array of uses in aerospace, automotive, broadband, cellular infrastructure and many other areas. Of particular interest is its role in 5G technology. While there are many things causing the economy to slow, the implementation of 5G across the country and world puts this company is a good position.
What is a “triple threat” stock you ask? Well it’s a company that expresses element of earnings growth, income and value at the same time. SWKS currently pays a dividend yield of 2%, which is close to the S&P 500 average. It also has valuation ratios like price/forward earnings, EV/EBITDA, P/B and P/S that are currently below its 5-year average. While the 5-year projected earnings growth is 10.25%, it is likely that the implementation of 5G may place that figure a little higher. As the company reports its next earnings, the outlook might be increased.
SWKS peaked with mot other stocks in February, but its decline wasn’t necessarily the same as other companies. While the price declined from around $125 to $70, similar to other semiconductor stocks at 44%, it was the muted volume during the decline that makes things interesting.
While the price retested its mid-2019 lows in price, its On-Balance Volume (OBV) remained elevated near the level when it was trading near $110. The OBV indicator adds volume to its tally on up days and subtracts it on down days. Even though the down days significantly outnumbered up days in the last month, the up days occurred on significant volume. This is an indication of some accumulation of shares during the sell-off. Tuesday’s breakout from its trading range on high volume is an indication of a trend reversal.
The near-term target for this stock is $105, which is the 61.8% retracement of the downtrend from February.
Option traders may want to consider selling the 17 APR 20 79/78 short put vertical for around $0.30 a share. The max gain of $30, or 42% ROR, will be achieved if the stock closes at $79 or higher at expiration. Consider buying it back early for $0.10 or less.