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Skyworks Solutions vs. Marvell: Which 5G Stock is a Better Buy?

As several industries ramp up 5G deployment for an improved internet experience and greater ability to handle intensive applications, the 5G network market is expected to witness exponential growth. This should boost the demand for services by Skyworks Solutions (SWKS) and Marvell Technology (MRVL). Let’s find out which of these stocks is a better buy now.

Both Skyworks Solutions, Inc. (SWKS) and Marvell Technology, Inc. (MRVL) are involved in the development, manufacturing, and marketing of semiconductor products and related solutions worldwide. SWKS offers circulators/isolators, wireless analog systems, voltage regulators, among other products, for use in aerospace, automotive, cellular infrastructure, and other sectors. MRVLs portfolio includes Ethernet solutions, fiber channel products, single or multiple core processors, and other related applications.

The global 5G technology market is expected to exceed a valuation of $700 billion in 2025, growing at a 70.83% CAGR from 2020. Propelled by a widespread adoption of 5G technology solutions and the expansion of telecommunications and network infrastructures, the 5G industry is set to witness strong growth this year. In fact, the need for faster communication and lower latency to tackle critical applications in healthcare and other industries should act as a catalyst to the industry’s growth. So, SWKS and MRVL are well positioned to witness robust demand for their chips, which are needed in 5G-enabled devices and technologies.

SWKS has gained 31.9% over the past year, while MRVL has returned 57.6% over the same period. Also, in terms of past six months’ performance, SWKS surpassed MRVL’s 17% performance with an 18.5% gain. But which of these stocks is a better pick now? Let’s find out.

Latest Movements

Last month, SWKS announced the pricing of $1.5 billion in aggregate principal amount of its senior notes. The company plans to use the net proceeds from the offering to fund the $2.75 billion previously announced acquisition of the Infrastructure & Automotive business of Silicon Laboratories Inc.

In April, the company entered into a definitive agreement with Silicon Laboratories Inc. to acquire its Infrastructure & Automotive business for $2.75 billion. Since the technology portfolio of Silicon Lab is complementary to the company’s product portfolio, this acquisition will position SWKS to drive significant market growth and leverage its global sales channels.

This month, MRVL launched industry's first 1.6T Ethernet PHY with 100G PAM4 electrical input/outputs (I/Os) in 5nm to support the high-speed network and bring scalability for cloud workloads. Also, it recently expanded its Coherent Digital Signal Processor (CDSP) portfolio with Deneb 400G DSP to enable open ecosystem to disaggregate optical architectures.

Recent Financial Results

During the second quarter that ended on April 2, 2021, SWKS’ revenues increased 53% year-over-year to $1.17 billion. The company’s gross profit grew 54% from the year-ago value to $578.4 million, while operating income rose 87.8% year-over-year to $374.7 million. Also, its non-GAAP net income surged 72.2% year-over-year to $395.2 million. Its non-GAAP EPS increased 76.9% year-over-year to $2.37 over this period.

MRVL’s net revenue increased 20% year-over-year to $832 million in the fiscal first quarter that ended on May 1, 2021. However, the company’s gross profit came in at $418.14 million, representing a decrease of nearly 1% sequentially. Moreover, its operating loss came in at $82.31 million, while its net loss came in at $88.24 million. MRVL reported a loss per share of $0.13, compared to income per share of $0.02 in the quarter that ended on January 30, 2021.

Past and Expected Financial Performance

SWKS’ revenue increased at a CAGR of 5.2%, over the past five years. In comparison, MRVL’s revenue grew at an annualized rate of 5%, over this period.

SWKS’ revenue is expected to rise 49.1% in 2021 and 4.6% next year. The consensus EPS estimates indicate a 71.2% improvement in the current quarter and 68.2% in fiscal 2022. On the other hand, analysts expect MRVL’s revenue to increase 41.8% in the current year and 19.1% in 2023. Also, the company’s EPS is estimated to increase 47.6% in the current quarter and 33.1% next year. 

Profitability      

SWKS’ trailing-12-month revenue is 1.4 times that of MRVL. But MRVL is more profitable with a gross profit margin of 51.7% versus SWKS’ 49.3%.

But SWKS’ ROE of 27.4% compares favorably with MRVL’s negative 2.2%.

Valuation

In terms of non-GAAP forward PEG, MRVL is currently trading at 1.59x, 78.7% higher than SWKS, which is currently trading at 0.89x. Also, its trailing-12-month EV/Sales of 15.72x is 154.8% higher than SWKS’ 6.17x.

In terms of trailing-12-month Price/Sales as well, MRVL’s 11.99x is 83.1% higher than SWKS’ 6.55x.

POWR Ratings

SWKS has an overall grade of B, which equates to a Buy rating in our proprietary POWR Ratings system. However, MRVL has an overall grade of D, which translates into a Sell rating. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

In terms of Quality Grade, SWKS has a B, consistent with its higher-than-industry EBIT margin. MRVL’s Quality grade of D is in sync with its lower-than-industry ROTC.

In terms of Value Grade, SWKS has a B, in sync with its lower-than-industry P/E ratio. In contrast, MRVL has a Value Grade of D. This justifies its higher-than-industry P/E ratio.

Of the 98 stocks in the B-rated Semiconductor & Wireless Chip industry, SWKS is ranked #23, while MRVL is ranked #83.

Beyond what we’ve stated above, our POWR Ratings system has also provided grades for both SWKS and MRVL for Stability, Growth, Sentiment and Momentum. Get all SWKS grades here. Also, click here to see the additional grades for MRVL.

The Winner

Although MRVL’s innovative product launches and strong revenue growth in the last reported quarter have helped it witness impressive growth, the company’s higher operational losses and low profitability could slow down its stride in the chip industry.

On the other hand, SWKS is in a much better position to grab market opportunities, given its superior financials and strategic acquisition. So, we believe SWKS is a better investment right now.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Semiconductor & Wireless Chip industry.

Click here to check out our Semiconductor Industry Report for 2021


SWKS shares were trading at $168.55 per share on Friday afternoon, down $3.91 (-2.27%). Year-to-date, SWKS has gained 10.88%, versus a 11.84% rise in the benchmark S&P 500 index during the same period.



About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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