Qorvo Analyst Throws In The Towel On Positive View, Downgrades Stock

Ambrish Srivastava of BMO Capital downgraded Qorvo Inc QRVO to Market Perform, citing three quarters of uneven execution and potential share loss to rival Skyworks Solutions Inc SWKS.

The analyst also expressed doubts whether the Apple Inc. AAPL supplier can meet its targeted double-digit top-line growth for FY2018.

Qorvo reported lower-than-expected third quarter revenues of $826 million versus consensus expectation of $820 million. EPS came in at $1.35, topping Street view of $1.26 estimate, largely driven by lower OpEx.

For the fourth quarter, at the midpoint, guidance is for revenues to be down 24 percent sequentially to $630 million, versus consensus expectations of $719 million. EPS is guided to be $0.80 at the mid-point, below consensus estimates of $1.04.

“While the company did make good progress on the GM side, top-line guidance for March is so far below expectations/seasonality, and in sharp contrast with Skyworks’, which raise the question of share loss,” Srivastava wrote in a note.

The company believes it can grow FY2018 revenues by double digits, which, according to the analyst, appears to be a “tall order”, given the significant guide down for the March quarter.

Qorvo noted that Apple and Huawei were over 10 percent of total revenues in the third quarter, with the largest customer, which the analyst believes was Apple, at 37 percent of total.

“We estimate that Apple revenues were roughly flat q-q and up 17% y-y to ~$305 million,” Srivastava added.

The analyst also cut his price target on Qorvo shares sharply to $58 from $72.

At last check, shares of Qorvo were down 0.23 percent to $64.40.