Analyst: Qorvo Is Still Well Positioned To Benefit From 5G Era

Qorvo Inc QRVO reported solid first-quarter results and announced its second-quarter guidance ahead of expectations. Despite Huawei’s ban, Qorvo seems poised to benefit from the 5G opportunity, according to DA Davidson.

The Analyst

DA Davidson’s Thomas Diffely maintained a Neutral rating on Qorvo while raising the price target from $66 to $74.

The Thesis

Qorvo’s quarterly results were impressive and only slightly missed the pre-Huawei guide, which means that the company could have delivered a significant upside had the Chinese telecom company not been banned, Diffely said in the note.

The company reported its first-quarter revenues and pro-forma EPS at $775.6 million and $1.36, respectively, heating the Street’s expectations of $740 million and $1.15. Qorvo recorded a 70bps upside in gross margin, driven by a favorable product mix and improving manufacturing efficiencies, Diffely mentioned.

Management guided to second-quarter revenue and pro-forma EPS of $745-$765 million and $1.30, above the consensus estimates of $740 million and $1.23, respectively.

The analyst believes Qorvo is well positioned to capture a meaningful share of the $1 billion incremental 5G RF opportunity in 2020, backed by design wins at all the major handset makers.

The company’s strategic portfolio is gaining traction with a ramp in 5G, which should drive growth in Mobile, Diffely said. Referring to IDP, the analyst mentioned that BAW and GaN based technologies were driving design wins, an acceleration of 5G investments in China was generating upside and the acquisition of Active-Semi, which was closed in the first quarter, will add to growth.

Price Action

Shares of Qorvo were down 4.2% to $67.88 at time of publishing.

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