Why the Qorvo Stock rally is not over yet

0
4

Qorvo (NASDAQ: QRVO), a semiconductor supplier best known for supplying radio frequency components, had a strong 2020 as its share price rose around 60% throughout the year. The stock has also risen almost 3 times since the end of 2018 and is now trading at around $ 182 per share. The recent rally is driven by the wireless industry’s ongoing transition to 5G technology, with strong demand from smartphone makers and wireless base station providers. Now are there any other payoffs in the cards for Qorvo or is the stock price valued correctly in the short term? Let’s take a look at what drove Qorvo’s share price gains in recent years and what the outlook for the company might be. Check out our dashboard analysis on What drove Qorvo Stock’s 3x% gain since 2018? for a detailed look at how Qorvo’s revenue, margins and multiples have evolved over the past few years.

What has driven the Qorvo share price in recent years

Qorvo sells cellular, ultra-broadband and Wi-Fi focused radio frequency solutions to manufacturers of mobile products such as smartphones, portable devices and tablets. The company also sells RF, System on Chips and power management solutions to customers in the wireless infrastructure, defense, and automotive industries. The company’s revenue increased slightly from around $ 3 billion in FY’18 (fiscal years end-March) to around $ 3.2 billion in FY’20, due to increased demand from mobile customers such as ‘Apple.
AAPL
, although this was partly offset by lower demand for base station products. However, revenues have improved over the past 12 months to $ 3.5 billion, due to demand for the 5G upgrade. Qorvo’s net margin has steadily improved from negative levels in FY’18 to 12.5% ​​over the past 12 months as revenues continued to grow while some fixed costs such as R&D and General and administrative expenses increased at a slower pace. Qorvo’s reported EPS also improved from around $ 0.32 in 2018 to around $ 3.88 in the past 12 months, thanks to improved earnings as well as share buybacks from the company, who have reduced their number of shares by approximately 6% over the past 2 years. Qorvo’s P / E multiple has also increased modestly, from around 57x in 2018 to around 64x currently (based on past 12-month EPS).

Are there more payouts in the cards for Qorvo Stock?

The ongoing transition to 5G technology should help Qorvo in the short to medium term. On the smartphone front, the company predicts that 5G phone shipments will double, from 250 million in 2020 to 500 million units this year. 5G components are also more complex and expensive compared to 4G, and Qorvo estimates that each 5G smartphone could add incremental RF content of around $ 5 to $ 7. [1] Qorvo is also expected to benefit from strong demand from Apple, one of its biggest customers. Apple has increased its iPhone production targets for the first half of 2021 by 30% from last year by Nikkei. [2] In addition, Qorvo’s infrastructure business, which has experienced mixed performance in recent years, should also recover, driven by the deployment of 5G base stations and demand for its GaN power amplifiers.

Overall, Qorvo is poised to experience strong growth in this fiscal year, with revenue set to climb around 18% by consensus, and profits are also expected to rise to around $ 8.50 a year. share, on an adjusted basis. This makes the company’s expected P / E relatively attractive at around 21x. Given the relatively reasonable forward valuation, we believe the stock has room for improvement in the short term. That being said, investors should note that the semiconductor market is somewhat cyclical, and if there are any signs that the 5G upgrade cycle is overshadowing, the stock could see a correction.

What if you are looking for a more balanced portfolio instead? here is a high quality wallet to beat the market, with a return of around 130% since 2016, compared to around 70% for the S&P 500. Comprised of companies with strong revenue growth, strong earnings, plenty of cash and low risk, it has outperformed the market in its whole year after year, steadily.

See everything Trefis price estimates and Download Trefis data here

What is behind Trefis? Find out how it fuels a new collaboration and why Financial directors and finance teams | Product, R&D and marketing teams

.

LEAVE A REPLY

Please enter your comment!
Please enter your name here