/AI%20(artificial%20intelligence)/shutterstock_2074536715.jpg)
Semiconductors form the basis of modern electronics. They are used to make a variety of devices, such as computers, smartphones, tablets, and other digital gadgets, and are utilized as part of almost every industry.
Because of their versatility and efficiency, semiconductors are in high demand, especially now with the strong momentum of artificial intelligence (AI). While Nvidia (NVDA) and Advanced Micro Devices (AMD) are the most popular semiconductor names, some under-the-radar chip stocks - such as Skyworks (SWKS) and Qorvo (QRVO) - could also be good long-term investments.
Prior to their quarterly earnings reports on July 30, Qorvo is trading 5.2% below its 52-week high, while Skyworks is trading 3% below its all-time high. Let's find out if now is the time to buy these two beaten-down AI chip stocks.
#1. Qorvo
Qorvo (QRVO) creates innovative radio frequency (RF) solutions that connect the world. The company develops and manufactures a wide range of products, including amplifiers, filters, duplexers, and switches, which are critical for wireless and broadband communications. Qorvo serves a wide range of markets, including mobile, network infrastructure, defense/aerospace, cable TV, automotive, and more.
Valued at $11.59 billion, Qorvo stock is up 10.3% YTD, compared to the S&P 500 Index’s ($SPX) gain of 15%.
Qorvo’s Connectivity and Sensors President, Eric Creviston, believes the company can thrive with the help of AI. He envisions "AI as a transformative force in IoT, enhancing capabilities and user experiences that shape a connected future where every element safely and seamlessly works in concert."
In the recently reported fiscal fourth quarter, total revenue increased 48.7% to $940.9 million. The company also reported a profit of $0.03 per share, compared to $1.39 in the year-ago quarter. For the full fiscal year 2024, revenue jumped 5.6% to $3.76 billion.
During the quarter, Qorvo completed its acquisition of Anokiwave. Qorvo plans to use Anokiwave's high-performance silicon integrated circuits (ICs) to provide highly integrated complete solutions for a variety of industries.
Qorvo ended the quarter with $1.03 billion in cash and cash equivalents, and generated $169.6 million in free cash flow (FCF) during Q4. Qorvo's debt-to-equity ratio of 0.56 appears manageable.
On July 30, the company will release its first-quarter fiscal 2025 results. Management anticipates quarterly revenue of $850 million, plus or minus $25 million, a 30.5% increase from the same period last year.
For the full fiscal year 2025, analysts expect revenue to increase by 3.4%, followed by an 8.7% increase in fiscal 2026. While analysts expect earnings to dip slightly by 1.7% in fiscal 2025, they are expected to bounce back in fiscal 2026, rising 30.6%.
Qorvo stands out as a robust investment in the RF solutions space. Its growth prospects in emerging technologies like 5G, IoT (Internet of Things), and automotive RF solutions make it an appealing stock to investors. Plus, trading at 15x forward 2026 earnings, Qorvo seems like a reasonable buy in the semiconductor space.
Overall, Qorvo stock is rated a “hold” on Wall Street. Of the 22 analysts that cover QRVO, four rate it a “strong buy,” two recommend a “moderate buy,” 13 say it’s a “hold,” one suggests a “moderate sell,” and two recommend a “strong sell.”
QRVO has surpassed its average target price of $111.21. The Street-high estimate for QRVO is $145, which suggests the stock can rally as much as 16.6% from current levels.
#2. Skyworks Solutions
Skyworks Solutions (SWKS) specializes in the design, development, and manufacture of high-performance analog and mixed-signal semiconductors. These products are used in a variety of applications, including smartphones, IoT, automotive, and wireless infrastructure markets.
Valued at $18.6 billion, Skyworks stock is up 4.4% YTD, lagging the broader market's gain.
In the second quarter of fiscal 2024, lighter-than-expected market demand in the mobile business led to a slower quarter. Total revenue decreased 9.3% to $1.04 billion, while GAAP (generally accepted accounting principles) net income fell 22% to $1.14 per share.
While working to advance in a highly competitive industry, Skyworks has kept its debt levels low. Its low debt-to-equity ratio of 0.16 is safe for now. At the end of the quarter, the company had $1.2 billion in cash and cash equivalents. Furthermore, the company generated $273 million in FCF during the quarter.
The company also pays a dividend, with the yield of 2.34% outpacing the tech sector average of 1.4%. Its forward payout ratio of 41% seems sustainable if SWKS continues to generate consistent earnings.
The company will release its fiscal third-quarter earnings results on July 30. Analysts expect Q3 revenue to be around $900.5 million, down from $1.07 billion in the year-ago quarter. Skyworks is expected to report a GAAP profit of $0.75 for Q3.
For the full fiscal year, analysts expect a 12% dip in revenue followed by a 26% drop in earnings. However, in fiscal 2026, the company is expected to recover, with the consensus calling for 1.3% growth in revenue and a 5.8% increase in earnings.
Skyworks' growth prospects in emerging technologies such as 5G, IoT, and automotive semiconductors make it an attractive investment now. The stock is trading at 17 times forward earnings, compared to its five-year historical average of 18.1x.
Overall, Skyworks stock is rated a “hold” on Wall Street. Of the 25 analysts that cover SWKS, six rate it a “strong buy,” 17 recommend a “hold,” one says it’s a “moderate sell,” and one suggests a “strong sell.”
Currently, Skyworks is trading above its average target price of $105.53. The Street-high estimate for SKWS is $130, which suggests the stock can rally more than 10% from current levels.
