Pacific Crest Cuts Qorvo On Apple, Samsung And China Doldroms

Qorvo Inc QRVO received a Sector Weight rating from Pacific Crest Thursday after the company preannounced negative December-quarter revenue. The earnings preannouncement comes on the back of weaker-than-expected Apple Inc. AAPL's iPhone demand, suggesting weakness in China and specifically at SAMSUNG ELECTRONIC KRW5000 SSNLF. The firm issued a $50 fair-value estimate based on 8x F2017 (March) EPS estimate of $6.09.

At the time of this publication, Qorvo shares were trading down 1.97 percent at $44.77 on Friday.

Related Link: Apple Rebounds After Cirrus And Qorvo Slash Guidance

Rating Justification

"At current levels, we see limited downside risk and continue to expect growth in C2016 from RF TAM growth. However, we remain on the sidelines as we anticipate underperformance vs. its peers is likely to keep the stock range-bound," according to the Pacific Crest note.

Regarding the transition to Chinese LTE, Pacific Crest sees both a "bull" and a "bear" case.

"Transition of Chinese LTE is expected to drive outsized growth through content gains," the analysts at the firm noted on being bullish; however, on the bearish side of the argument, the crest commented, "The transition to Chinese LTE is unlikely to drive sustainable increases in content, as historically this has not been the case." Guidance Lowered, Estimates Lowered

December quarter revenue guidance was lowered, while March guided flat.

The company's downward revision was a result from worse-than-anticipated iPhone 6s/6s+ performance. "Qorvo lowered its December-quarter revenue guidance to approximately $620 million from its original guidance of $725 million provided in November 2015," the firm noted.

Pacific Crest lowered its FY2016 estimates for Qorvo on Thursday. "Given the company's pre-announcement, we are lowering our F2016 (March) revenue estimate to $2.62 billion and EPS estimate to $4.39. This compares to our prior estimates of $2.73 billion and $4.66," the firm said.

"Accordingly, we are lowering our F2017 estimates to $2.99 billion and $6.09 from $3.12 billion and $6.49."

The company's stock is currently down 33.86 percent year-over-year. Qorvo's monthly performance stands at -21.84 percent. The company's year-to-date performance is -12.04 percent.