In a recent report, Citi analysts downgraded Skyworks Solutions (ticker: SWKS) and Qorvo (QRVO) from Neutral to Sell. They also reduced the price targets for both stocks, bringing them down to $87 and $78, respectively.
Skyworks stock has dropped by 3.3% to $94.95, while Qorvo shares have seen a 4% decrease, making them the worst performer in the S&P 500 during premarket trading.
The analysts downgraded these stocks due to concerns over “increased China substitution risk.” This concern arises from the release of the Huawei Mate 60 phone, which Citi believes uses domestic radio frequency and connectivity chips. The fact that the main chip inside the phone was manufactured on a 7-nanometer node indicates significant progress for China’s domestic chip-making industry in producing mass-market consumer device semiconductors.
According to Citi analysts, Skyworks and Qorvo have already experienced a decline in sales in China over the past year due to weakening smartphone demand. The increased competition from Chinese domestic radio frequency component makers could further erode their market share and hinder their sales recovery in 2024.
Despite the downgrades, Citi analysts maintain a positive outlook on Nvidia. They highlight that the impending launch of the Blackwell B100 GPU in the first half of 2024 is likely to be a major catalyst for the stock.
Marvell Technology also retains its buy rating because of the company’s attractive opportunity in the 800 gigabits per second optical artificial-intelligence sector. However, analysts believe that the Street’s enterprise-networking and carrier-infrastructure estimates for 2024 need to be adjusted by approximately 10% to reflect a more accurate picture.
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