Skyworks (NASDAQ:SWKS) stock was down 1.39% in mid-afternoon trading on July 8. The company produces semiconductors for wireless handsets and other devices. Skyworks stock had been punished due to the trade war between the United States and China.
Huawei, the Chinese telecommunications giant, has enjoyed a fruitful relationship with Skyworks as a consistent supplier. Skyworks generates 12% of its revenue from Huawei. In mid-May, the Bureau of Industry and Security (BIS) added Huawei and its affiliates to the "Entity List" maintained by the US Department of Commerce. This prevented Skyworks from supplying to Huawei and its affiliates. In response, Skyworks cut its revenue guidance.
The G-20 meetings in late June produced a "trade truce" between the US and China. The Trump administration agreed to ease restrictions on Huawei. This, in turn, produced a nice run-up for chip stocks. Shares of Skyworks have now surged 18% over the past month.
U.S. and China have re-engaged on trade talks in July, but a long-term agreement still appears remote. There are signs that the U.S. consensus is backing off its hawkish stance, but it is still early.
Skyworks stock nearly tested overbought levels but has since tapered off. A readjustment in the wake of positive trade news has the potential to push Skyworks to challenge its annual highs. For those looking for a value pick, this is not an ideal entry point. Still, Skyworks does not look like a sell with momentum back in the sector.
