Skyworks Solutions Inc.: Buy SWKS Options in Advance of Impressive Q2 Earnings

Skyworks Solutions Inc. (NASDAQ:SWKS) had delivered an impressive performance beyond what you could have imagined when I wrote about the stock in August 2014. My last coverage on the options of Skyworks Solutions was in August 01, 2014 in a post in which I provided a two-month update on a previous coverage of the stock.

When I wrote that piece in August, the shares of Skyworks were trading around $52.12 and I gave the stock a $58.70 price target by January 2015. As at market open on January 02, 2015, the shares of Skyworks Solutions opened with a $73.60 to mark an impressive 41.21% increase in four months.

However, the most impressive point to note is that the shares of Skyworks Solutions made a new 52-Week high of $92.99 yesterday. The new 52-Week high marks a 171% increase over the 52-Week low of $34.30 as shown in the chart below.

SWKS Chart

From the chart above, you’ll notice the green arrow that shows Skyworks’ impressive bullish ascent in the last one year. You’ll also notice that the 50-day moving average (currently at $80.72) has been a consistent support level for the stock over the last one year. In addition, despite the impressive bullish ascent of the stock, it doesn’t appear to be overbought as an RSI of 66.46 shows that the stock has a realistic buying momentum.

New Coverage of Skyworks Solutions

If you are new to the Skyworks party, it might interest you to know that Skyworks with its market capitalization of $17.58B is strongly connected to the huge possibilities inherent in the Internet of All Things (IoT). Skyworks is engaged in the production of analog semiconductors. The Company supports automotive, broadband, cellular infrastructure, energy management, Global Positioning System (GPS), industrial, medical, military, wireless networking, smartphone and tablet applications.

The Bullish Case for Skyworks

Skyworks is currently hot in the news on the heels of an announcement that the company is set to replace PetSmart in the S&P 500. I am impressed that Skyworks has made it into the S&P 500; nonetheless, I am more concerned with the fundamentals of the company because the listing of a stock in the S&P 500 does not guarantee its performance.

Starting with the company’s financials, Skyworks has consistently delivered revenue and earnings beat in the last four quarters. In the recently reported quarter (Q1 2015) on January 22, Skyworks reported earnings of $1.26 per share to beat the consensus estimate of $1.19 and to mark an 88% year-over-year improvement. The earnings beat in the first quarter marks the ninth consecutive quarter of earnings beat.

The company also reported revenue of $805M to mark a 59% year-over-year improvement and to mark a 12% quarterly improvement. Interestingly, the reported revenue also outperforms the company’s guidance of $770M in revenue.

How to Trade SWKS Options

We can realistically expect the shares of Skyworks to continue rising inasmuch as the company continues to deliver impressive financials. The prospects of Skyworks are bright as it continues to benefit from the excellent demand for Apple’s iPhone 6. In addition, Samsung’s Galaxy S6 and S6 Edge additions to the Android line up will also increase revenue for Skyworks in the short to medium terms.

I am bullish on Skyworks and I recommend buying SWKS call options. I am getting into the SWKS May 2015 95.000 call (SWKS150515C00095000) at an asking price of $4.20. Skyworks is set to release its second quarter (Q2 2015) results on April 20, and I believe that the stock will be heading into new highs on the wings of impressive financials once again.

— Daily Option Alerts

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