Why Mizuho Likes Qorvo

In a report issued Tuesday, Mizuho analyst Vijay Rakesh initiated coverage on Qorvo Inc QRVO with a Buy rating and a $92 price target. He points out a few tailwinds that position the company for growth, going forward. Namely: expanding RF content, “incremental BAW filter capacity, a combined PA+Filter product roadmap, and cost synergies.”

Below are the key points to the firm’s investment thesis:

• Robust 4G growth in China positions Qorvo well for a strong ramp into the second half of the year, especially as the country moves to 5-mode LTE and marquee handset OEM launches provide seasonality.
• New Integrated front ends with in-house filter supply (SAW, TC-SAW and BAW) also bode well for the company, which gained access to these technologies after the merger -- Qorvo is the result of a merger between RF Micro Devices, Inc. RFMD and TriQuint Semiconductor TQNT.
• The other big benefit derived from the merger is the creation of manufacturing cost synergies, which Qorvo can drive “by consolidating front end Gallium Arsenide fabs” and relocating TriQuint’s assembly and test facilities to China – which will also aid margins.
• China (which represents roughly ¼ of the company’s mobile revenues) and customer exposure (especially Foxconn and Samsung, which represent almost 50 percent of sales) should be key growth drivers
• Potential for M&A and consolidation within the industry should not be discarded.