Skyworks Solutions (NASDAQ: SWKS) and soft (NYSE: CHWY) were not the best performers in 2021, as both companies’ shares fell despite tremendous business growth.
However, these tech stocks could accelerate in the new year thanks to secular growth opportunities in the industries in which they operate. Let’s take a look at why Skyworks Solutions and Chewy could race to the bullish and leave this year’s disappointing performance behind.
Shares of Skyworks Solutions have fallen in recent times thanks to speculation that demand for Apple‘s (NASDAQ: AAPL) The iPhone would take a hit during the holiday season. Reports suggest that long wait times due to supply chain delays and production constraints have deterred customers from switching to the latest iPhone models. This weighed on Skyworks as it provides wireless chips for the iPhone.
However, there are indications that Apple’s supply chain could improve. Morgan stanley Analyst Katy Huberty recently upped her forecast for iPhone shipments in the quarter ended December to 83 million units from the previous estimate of 80 million units, saying the chain issues of Apple’s supply has eased. If that estimate is met, that would translate to a year-over-year increase of 3 million iPhone units sold, and that would be a good thing for Skyworks as it derives most of its revenue from chip sales. to Apple.
Apple provided 59% of Skyworks revenue in the previous fiscal year, so an increase in Apple sales would be good for Skyworks. A report cited by a Taiwanese publication DigiTimes points out that Apple could sell more than 300 million iPhones in 2022, a significant increase from iPhone shipments estimated this year at 240 million units.
It might sound ambitious, but it won’t be surprising to see Apple move closer to that goal as it is reportedly working on a 5G-capable iPhone SE that could launch in 2022. Some expect the 5G iPhone SE to add 30 million. of units. to Apple shipments next year.
All of this indicates that Skyworks’ tremendous momentum is here to stay. The company’s earnings in the recently closed fiscal year 2021 (ended October 1) increased 52% year-over-year, while adjusted earnings climbed 71% to $ 10.50 per share. Analysts estimate Skyworks revenue will grow 11.4% in fiscal 2022, while earnings are expected to rise 10% to $ 11.56 per share. The promising outlook for its largest customer could help Skyworks easily exceed those expectations.
And Skyworks Solutions is currently trading at 18 times trailing profits versus the S&P 500is a multiple of 28.
Chew stocks were hammered in 2021, even as the company successfully capitalizes on increased online sales of pet food and products. The company’s revenue in the third quarter of fiscal 2021 increased 24% year-over-year to $ 2.21 billion. Chewy’s gross margin increased 90 basis points in the quarter to 26.4%.
Investors, however, pressed the panic button after Chewy’s latest earnings were released on December 9, as the company’s loss of $ 0.08 per share was greater than the anticipated loss of $ 0.04 per share. of Wall Street. The company blamed supply chain issues, cost inflation and labor shortages for the loss. But investors shouldn’t miss the forest for trees as Chewy is on course to take advantage of a rapidly growing market.
The American Pet Products Association estimates spending on pet products topped $ 100 billion last year. Morgan Stanley predicts pet spending could reach $ 275 billion by 2030.
Add to that that 59% of spending on pet products is expected to be online by 2025, up from 30% at the end of last year, and it’s obvious that Chewy is operating in a growing industry. Chewy owns 41% of online spend on pet products and has a growing customer base who are spending more money on their offerings.
Chewy is well positioned to maintain its impressive long-term growth rate and the stock is trading at just 2.67 times sales, meaning it is available at a discount from the S&P multiple of 3.19. 500. Investors looking to add potential growth value to their portfolios should take a closer look at Chewy.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.