KeyBanc Downgrades Qorvo On Failure To Qualify For New iPhone

Latest field checks indicate Qorvo Inc (NASDAQ: QRVO) has failed to be qualified for the latest iPhone and is likely to lose market share to Broadcom Inc (NASDAQ: AVGO), according to KeyBanc Capital Markets.

The Analyst

KeyBanc's John Vinh downgraded Qorvo from Overweight to Sector Weight.

The Thesis

Multiple supply chain partners at the Mobile World Congress and during an Asia trip indicated the company had met the performance specification requirements in the mid/high-band PAD, Vinh said in a note.

This was the reason for previously upgrading the stock, as Qorvo was expected to gain market share after its design win in the 2019 iPhone. Vinh said the latest checks indicate the company had failed to qualify, despite the design win. This may not be a performance-related issue, but rather an issue related to qualifying for the part for production.

With this miss, Qorvo is unlikely to generate even flat mobile revenues in 2019, with a loss of market share to Broadcom.

Although this is a setback, it’s a near-term concern. In the longer term, Apple Inc. (NASDAQ: AAPL) will still want to have multiple sources of supply and Qorvo should be able to compete with Broadcom for market share in future-generation iPhones, the analyst said.

Price Action

Shares of Qorvo fell 3.2 percent to $74.79 on Friday.

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