Shares of Skyworks Solutions (NASDAQ: SWKS) fell 24.4% lower in May 2019, according to data from S&P Global Market Intelligence. The maker of communications-oriented microchips saw the drop starting with a solid but uninspiring earnings report, followed by geopolitical drama as major customer Huawei suddenly became a dead revenue stream until further notice.
Chinese technology giant Huawei is far from Skyworks' largest client -- that distinction belongs to Apple (NASDAQ: AAPL), which is facing its own challenges at the moment -- but Skyworks' shareholders do need to pay attention to the Chinese situation. Huawei accounted for 12% of Skyworks' total sales in the first six months of 2019, and the two companies are not doing business together these days.
Skyworks updated its third-quarter guidance targets in early June, lowering the revenue projection by 7% to $765 million. Adjusted earnings are now seen near $1.34 per diluted share, an 11% decrease from the original guidance statement. In other words, the negative market action last month makes sense in light of the actual damage to Skyworks' revenues and earnings. When Apple and Huawei sneeze, Skyworks Solutions is quick to catch a cold. If and when the international trade tension eases up, this stock could make an impressive comeback. There's just no telling how long we might have to wait for that event, so don't hold your breath.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Skyworks Solutions. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.