Skyworks Solutions Options: Update 2 Months Later

It is essential that we take an introspective look at our prior option trades at least to rebalance our trading portfolio and to encourage ourselves. This is especially true as the general market continues with the second day of huge losses to end this week on a losing note. In June, I wrote a piece on the possibilities for options traders in the Internet of Everything in which I recommended trading the options of Skyworks Solutions Inc. (NASDAQ:SWKS).

When I wrote that post on June 10, shares of Skyworks Solutions were trading around $46 per share. I also recommended buying the SWKS Jan 2015 49.000 call (SWKS150117C00049000) at an asking price of $3.80.

Performance So Far

From a trading price of $46 per share in June 10, shares of Skyworks Solutions have traded up 13.3% to the current $52.12 trading price. More interesting is the fact that the stock has traded up for much of today leading up to 2.68% gains as at 3:25PM EDT. The January 2015 call option that I recommended at an asking price of $3.80 has traded up 76.3% to an asking price of $6.70 today.

Why Shares of Skyworks Has Surged in Recent Times

Shares of Skyworks Solutions have soared in the recent past mainly due to an impressive third quarter (Q3 2014) earnings result that it released. David J. Aldrich, chairman and chief executive officer of Skyworks aptly captures my positioning statement that the Internet of Things will lead to growth and profitability for Skyworks when he said, “Skyworks is entering a new and exciting growth phase driven by global wireless proliferation and the Internet of Things.”

Earnings at a Glance

  • Delivers $587.0 Million in Revenue, Up 35% Y-o-Y and 22% Sequentially
  • Expands Non-GAAP Operating Margin 480 Basis Points Y-o-Y to 30.5% (25.3% GAAP)
  • Posts $0.83 of Non-GAAP Diluted EPS, Up 54% Y-o-Y and 34% Sequentially ($0.58 GAAP)
  • Generates $199 Million in Quarterly Cash Flow from Operations
  • Guides to $1.00 in Non-GAAP Diluted EPS and $680 Million in Revenue in Q4 FY14

Upside Potential Going Forward

The starting point of upside potential in trading options of Skyworks Solution is seen in the optimistic fourth quarter guidance that the company gave. The company while commenting on its Q4 outlook said, “For the fourth fiscal quarter of 2014, we anticipate revenue to be up 43 percent year-over-year to $680 million with non-GAAP diluted earnings per share up 56 percent year-over-year to$1.00.”

The reasons outlined in the previous post about Skyworks’ link to the Internet of Everything landscape still holds. Another reason for increased upside potential in shares of Skyworks is its sustained expansion into the Chinese market with the launch of six products supporting MediaTek’s first 4G chipset targeting the broader China market.

How to Trade SWKS Options

The SWKS Jan 2015 49.000 call (SWKS150117C00049000) contract I recommended in June is ripe for the picking and I am clearing my money off the table on that particular trade. The general trading down that started in the market yesterday has me worried and I am being cautiously bullish now. I might get into the SWKS Jan 2015 55.000 call (SWKS150117C00055000) at an asking price of $3.70 when I see how the market improves next week.

— Daily Option Alerts

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