5G Adoption Bodes Well For Qorvo, Skyworks, Mizuho Says In Upgrade

Apple Inc. AAPL suppliers Skyworks Solutions Inc SWKS and Qorvo Inc QRVO have been getting a lot of love from Wall Street of late, primarily on the improving RF outlook.

The Analyst

Mizuho's Vijay Rakesh upgraded both Qorvo and Skyworks from Neutral to Buy. The analyst raised the Skyworks price target from $90 to $132 and Qorvo's from $80 to $125.

Takeaways On Qorvo, Skyworks

RF suppliers Skyworks and Qorvo are in for meaningful upside on the basis of an improving 5G handset outlook and about 50-60% higher RF content per 5G handset relative to 4G handsets, Rakesh said in a Friday upgrade note. (See his track record here.)

RF content per 5G handset is likely to see about 9% CAGR due to complexity and multiplexing, the analyst said.

Rakesh sees the RF market getting a boost from multiple upcoming catalysts, including:

3GSM slated for mid-February, which should result in multiple 5G handset launches
A Huawei settlement expected in the second half of 2020
Multiple Apple iPhone models that are expected to include 5G

"While RF suppliers SWKS and QRVO saw flat to declining revenues in 2018 and 2019 in a maturing handset market, we believe 2020E-21E should see a rebound as 5G requires an incremental 50%-60% increase in the RF content of handsets," Rakesh said.

The upcoming 5G catalysts and attractive initial handset pricing could accelerate 5G adoption, driving upside to Mizuho's estimates as well as the consensus, the analyst said.