Skyworks is deep in the oversold zone but is it the right time to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on May 24, 2022
  • Skyworks is down almost 36% YTD
  • The company issued lower guidance in the third quarter
  • The stock faces further decline as macroeconomic woes continue

Since its all-time high above $200 last year, Skyline Solutions, Inc. (NASDAQ:SWKS) has failed to replicate gains. At press time, the stock was trading at $102, down 35.99% year-to-date. The decline in the year is only slightly lower than a minus 39.44% return for a full year. Here is some reason why weakness has heightened this year.

Skyworks belongs to the semiconductor sector, which, up to date, continues to experience high demand and low supply. Strong demand for chips during the pandemic boosted semiconductors’ stocks, including Skyworks. Nonetheless, this year has brought a new set of challenges. 

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One of the challenges that have hit Skyline and other semiconductors, in general, is market skepticism. After the strong year 2021, investors were cautious that the bubble could finally burst for semiconductor names. As a result, investors turned to defensive names, which are also good at countering the current inflation.

Macro-economic tides have also been blamed. Supply chain challenges have hit the chip makers and their clients similarly, if not equally. Chip buyers such as Tesla have likewise been affected by Covid-19 outbreaks in China. 

Macro-economic troubles were evident in Skyworks Q3 2022 guidance. Despite reporting above-estimated second-quarter earnings, declines are expected in the third quarter. A non-GAAP EPS of $2.36 in Q3 was short of the $2.63 reported in Q2. The guidance also missed estimates of $2.55. Since then, the stock has been falling and is now in the oversold region.

Skyworks appears deeply oversold but has more room to fall

Source – TradingView

Technically, Skyworks is in the oversold territory, with the RSI pointing at a reading of 24. However, the stock has room to fall as the next support is $93. The stock could rise briefly but faces resistance at $115. Investors should not buy at the oversold level since further declines are possible.

Summary

Skyworks could fall further amid the macro-economic troubles. The next support is $93, but investors should wait further before buying.

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