Qorvo's Increased Competition For Apple Business Prompts Sell-Side Downgrade

Qorvo Inc QRVO's big contract win in early February with Apple Inc. AAPL to supply high and midband power amplifier duplexers in upcoming iPhones prompted Bank of America Merrill Lynch to drop its bearish stance, but the research firm's neutral stance has proven to be short-lived.

The Analyst

BofA's Vivek Arya downgraded Qorvo's stock rating from Neutral to Underperform with a price target lowered from $85 to $80.

The Thesis

Arya's upgrade of Qorvo after it won the Apple contract was based on the assumption the company would gain at the very least a 20-percent share of the high value PADs at the expense of the incumbent supplier Broadcom Ltd AVGO, Arya said in a Thursday downgrade note.

But Broadcom's failed bid to acquire QUALCOMM, Inc. QCOM now implies it can "refocus back on this market" and prevent Qorvo from gaining any "tangible share," Arya said.

Any upside potential in Qorvo's stock, which has jumped 23 percent since the turn of the year, is limited, the analyst said.

BofA's revised price target assumes downside from Tuesday's closing price of more than $82 per share and is justified based on a new belief that the company's market share in the PAD space will be less than the prior 20-percent assumption.

Qorvo's loss of market share potential "could prove irreversible" and reduce its total addressable opportunity at not only Apple, but within the entire technology sector, the analyst said.