Under the current market euphoria, there’s no shortage of red-hot tech stocks shooting through the roof. But if you’re looking to invest for the long term—as opposed to making overnight gains—there’s one group that stands out from the other tech players: 5G stocks.
You see, 5G deployment has already started, but the adoption of 5G is still at an early stage. The multi-year process will likely create a secular tailwind for a lot of companies.
Better yet, most of the companies are already established players in their industries. So investors are not betting on some start-up making it to the next year. Instead, they can simply sit back and wait for these businesses to capitalize on the 5G era.
Qorvo Inc (NASDAQ:QRVO) is one of these businesses. Created by the merger of TriQuint Semiconductor and RF Micro Devices, Inc. in 2015, Qorvo is a semiconductor company known for making radio frequency (RF) systems.
Note that both of Qorvo’s predecessors had been in business for a long time (TriQuint was founded in 1985 while RF Micro Devices was founded in 1991), and both were publicly traded companies before the merger. Qorvo is an S&P 500 component.
QRVO may not be a well-known ticker because the company does not sell products to the end consumer directly. However, Qorvo stock deserves investor attention because the company serves multiple high-growth markets, such as advanced wireless devices, wired and wireless networks, defense radar, and communications.
And due to the nature of Qorvo Inc’s business, 5G has become a natural catalyst for the company.
In the third quarter of Qorvo’s fiscal year 2021, which ended January 2, the company expanded shipments of complete main path solutions across leading 5G basebands and secured wins to supply next-generation complete main path solutions in 2021 Android handsets. (Source: “Qorvo Announces Fiscal 2021 Third Quarter Financial Results,” Qorvo Inc, February 3, 2021.)
At the same time, Qorvo secured design wins with multiple base station original equipment manufacturers (OEMs) to support U.S. 5G C-band deployments.
Remember, 5G is more than just for smartphones. In the third fiscal quarter, Qorvo was also selected to supply 5G/LTE, C-V2X, and Wi-Fi automotive-qualified products to leading OEMs in the auto sector, including Audi AG, Bayerische Motoren Werke (also known as BMW), and Volvo.
In fact, while 5G deployment has been delayed by the COVID-19 pandemic in many regions, Qorvo Inc’s financials have been growing rapidly. In the third fiscal quarter, the company generated $1.1 billion of revenue, which represented a 26.0% increase year-over-year. Its adjusted earnings came in at $1.74 per share, up 27.9% from the $1.36 per share earned in the year-ago period.
However you look at it, this is a company that’s firing on all cylinders. And the best is likely yet to come.
In the company’s latest earnings conference call, Qorvo Inc’s president and chief executive officer, Bob Bruggeworth, said, “Industry analysts estimate there were over 250 million 5G phones sold in 2020. For 2021, we forecast approximately 500 million 5G phones.” (Source: “Qorvo, Inc. (QRVO) CEO Bob Bruggeworth on Q3 2021 Results – Earnings Call Transcript,” Seeking Alpha, February 3, 2021.)
He continued, “Within these phones, the front-end content is increasing $5 to $7 versus 4G, including in the mid-tier, where content can approximately double.”
In other words, the number of 5G smartphones sold is projected to double this year. Meanwhile, 5G is presenting a higher content opportunity per smartphone for Qorvo Inc. Combined, the company should generate substantial revenue growth in calendar year 2021.
Now here’s where things get more interesting. After delivering such strong financials, you’d think QRVO stock would be a hot commodity this earnings season. But that was not really the case. In fact, in the trading session following the company’s earnings release, Qorvo stock tumbled 4.7%.
Qorvo Inc (NASDAQ:QRVO) Stock Chart
Chart courtesy of StockCharts.com
As you can see above, Qorvo stock’s post-earnings drop on February 4 actually created a gap in the stock chart. However, the stock has since started recovering and, as of this writing, is beginning to fill that gap. QRVO stock also seems to be bouncing back after hitting its 50-day moving average.
Bottom line: fundamentally, Qorvo Inc is a rock-solid company. For value-conscious investors, taking advantage of its post-earnings pullback could be an opportunity to get on board the 5G profit train.