bcic swks stock pitch final copy

Skyworks Solutions(SWKS)Kyle Waters | Jacob Zurita | Campbell Blue

February 29, 2016

Boston College Investment Club

Buy Pitch

1September 15, 2016

Agenda

Company Overview

Investment Thesis

Valuation

Risks

Summary

Questions

2September 15, 2016

Company Overview

Company Overview

Investment Thesis

Valuation Risks Summary Questions

Company Information

• Semi-Conductor Industry

• Tech

• Chip Making/Analog Semiconductor/ Radio Frequency Control/ Power Amp. Modules

• Wireless Communications Tech.

• Competitors: Intel, Linear Technologies, Analog Devices

• Woburn, MA

• North America, Japan, Asia, Europe

Stock Information

• Stock Price: 64.90

• MKT Cap: 12.44 Billion USD

• Dividend in 2015= $0.66/share

• P/E: 13.20

• P/B: 3.57

• EV/EBITDA: 8.50

• Beta: 1.28

• Industry Averages

• P/E: 24.7

• P/B: 3.15

• EV/EBITDA: 19.62

3September 15, 2016

Investment Thesis

CompanyOverview

InvestmentThesis


Efficiency and Innovation leading to diversified revenue base

Proliferation of the Internet of Things (IoT)

Growing LTE Market, especially in Asian and North American economies

4September 15, 2016

Applying Innovative Solutions to New Markets• Flexible and innovative products for solutions to growing

demand for powerful components• Major shifts in way individuals view and consume media, music

streaming, video streaming.

• Perhaps best play on Netflix that is not Netflix

• Adoption of technologies to previously untapped markets

• Automotive

• Medical

• Clean Energy

• Wearables

CompanyOverview

InvestmentThesis


5September 15, 2016

Appeared Dependency on Apple Inc.

• Estimated SWKS receives 30-40% of revenues from Apple• True number remains opaque

• High Correlation with AAPL performance (.702)

CompanyOverview

InvestmentThesis


6September 15, 2016

Appeared Dependency on Apple Inc.

• Skyworks increasingly reducing dependence on Apple• Agnostic to brand, scalable on any cellular OEM platform

• Supports all top-tier manufacturers

• Non-cellular revenues surpassed 25% of total revenues in 2015

• Skyworks well-positioned to remain a major supplier for Apple• Stalwart of consumer technology, provides stability for Skyworks

• Recently hinted that Skyworks’ products may have a larger dollar value of total components in upcoming iPhone 7

CompanyOverview

InvestmentThesis


7September 15, 2016

September 15, 2016 8

IoT: Wireless Connectivity of people, places and things• Connecting everyday devices requires reliable, powerful

and innovative communication technology• Skyworks’ highly innovative systems are scalable on virtually any

platform

• SWKS best positioned to innovate and capture this growing market

• Connected home, connected car, major customers include: NEST, Honeywell, Bose, GM, FCAU

• Major Innovations to capitalize on IoT:

• Industry-leading RF switches with analog control ICs for IoT applications such as connected home and smart lighting in homes

CompanyOverview

InvestmentThesis


9September 15, 2016

IoT: Wireless Connectivity of people, places and things

CompanyOverview

InvestmentThesis


10September 15, 2016

LTE Market Poised to Expand Worldwide

• Growth of smart phone market worldwide, especially in Asia• Over 80% of the Chinese population are on 2G or 3G, expansion to

4G LTE will explode in next few years

• Growth of LTE will require innovations in data capacity, Skyworks is leader in this technology

• Released world’s first solution optimized for LTE category M Applications

• Next Gen diversity receive modules, maximize LTE data throughput, help mobile communications deliver increasing amounts of data

• Chinese consumer appears to still be on track to upgrade to 4G

• OEM share shifts do not matter to Skyworks, relationships with all suppliers

• LTE dropping in price faster vs. 3G

CompanyOverview

InvestmentThesis



LTE Market Poised to Expand Worldwide


Valuation

• Price Target from Barclays Equity Research – $88

• Looks cheap vs. Major Comps

• Market severely discounting SWKS for appeared reliance on Chinese economy, Apple products• YoY revenue growth guidance from management: “high single digits

in next five years”

Company Overview

Investment Thesis



Comparison with Industry Leaders

Company Overview

Investment Thesis



DCF

Company Overview

Investment Thesis



Revenue Break Down


Revenues (Million $) for Fiscal Year Ending Sep.

2016 2015 2014 2013 2012 2011 2010

1Q 926.8 805.5 505.2 453.7 393.7 335.1 245.1

2Q N/A 762.1 481 425.2 364.7 325.4 238.1

3Q N/A 810 587 436.1 389 356.1 275.4

4Q N/A 880.8 718.2 477 421.1 402.3 313.3

Year N/A 3,258 2,292 1,792 1,569 1,419 1,072

Risks – Skyworks Specific

• Relatively low R&D spending could impair Skyworks’ Competitive Edge vs. Peers

• Increased competition could lead to a failure to secure deals from major customers • E.g. Intel gets deal with Apple on iPhone 7


Company Overview

Investment Thesis


Risks –Macro

• Lower than expected rate of phone replacement in developed economies• Consumers could be content with current generation smart phones

• Slowdown in emerging markets could sap demand for consumer electronics and smart phones which utilize SWKS components • Worries centered on recent troubles in Chinese economy

• 20-25% of revenues from China

• Crowded Trade?• 25 analysts following SWKS: 24 “BUY rating,” 1 “Hold rating,” 0 “Sell”

• Wall Street Darling


Company Overview

Investment Thesis


Summary

Company Overview

Investment Thesis



Efficiency and innovation leading to diversified revenue base

Proliferation of the Internet of Things

Growing LTE market: especially in Asian and North American economies

Questions?

Company Overview

Investment Thesis



Appendix


bcic swks stock pitch final copy

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