Tracking Two Names

 | Dec 14, 2012 | 1:30 PM EST
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Editor's note: This Breakout Stocks alert was sent out to subscribers at 11:49 a.m. EST on Dec. 14. To sign up for a free two-week trial, click here.

Two of our model portfolio names are trading lower this morning. This is an update on these names and we are not taking any action in this Alert.

Shares of Skyworks Solutions (SWKS) have been under considerable pressure in reaction to negative commentary aimed at Apple (AAPL). The shares were recently trading down 6.8% on the day to $19.61.

Over the past few days, we have seen a marked negative shift in sell-side analysts' opinions of Apple, which accounts for approximately 20% of Skyworks' sales. These include, but are not limited to, Macquarie's downgrade of Apple's contract manufacturer, Hon Hai, on Thursday, and UBS's decision to lower its estimates and price target on AAPL on Friday. The main concerns center on deteriorating iPhone demand, iPad cannibalization and an overall slowdown in growth. However, other analysts continue to pound the table on Apple shares, including Piper Jaffray, which insists that demand is not slowing.

Apple is in the process of launching its newer products internationally and today marks the first day that the iPhone 5 is available in China. We believe that strong sales in the new markets could easily overshadow the recent concerns, but we prefer to wait for these results before altering our current position. We remain upbeat on Skyworks as premier play on the mobile megatrend, and remain convinced that the stock undeservingly trades at a discount to its peers.

Next, shares of model portfolio holding Allot Communications (ALLT) have been declining since Wunderlich downgraded the company on Thursday. The shares are currently trading 4% lower on the day at $17.00.

This morning, Sterne Agee defended Allot competitor Procera Networks (PKT), insisting that the stock's selloff was a buying opportunity and there has been no shift in its fundamentals. We believe that what is good for one should be good for the other, and agree that there has not been a fundamental shift in Allot's business. After speaking with Allot management yesterday, we are confident that its long-term opportunities remain intact and that the company will continue to execute.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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