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Skyworks Solutions Inc.

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Skyworks' first-quarter fiscal 2017 earnings and revenues increased sequentially, driven by strong adoption of its solutions in flagship products of global smartphone makers. The company's second-quarter guidance reflects seasonal weakness, although revenues are expected to grow on a year-over-year basis. We note that the stock has underperformed the broader market in last one-year. Moreover, heavy investments in R&D are escalating operating expenses and contracting margins. Significant pricing pressure, technological obsolescence and high concentration risks remain additional headwinds. Neverthless, we expect strategic design win in IoT, automotive and 5G markets are significant positives. Moreover, aggressive share buyback will help the stock rebound in the rest of 2017.

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