Qorvo Inc: 5G Shares Dip on Strong Q1 Results

Qorvo Stock in Attractive Range Following Q1 Results

What’s better than finding a bullish 5G stock? A bullish 5G stock that has taken a breather after announcing strong financial results. And that’s exactly what Qorvo Inc (NASDAQ:QRVO) has done recently.

Qorvo stock has been having a solid year—up nine percent year-to-date and up 37% year-over-year. But since reporting strong financial results on August 4 and providing investors with a healthy outlook for the rest of the fiscal year, QRVO stock is actually down more than seven percent, erasing almost two months of gains.

What’s happened since then? Nothing on a corporate level. U.S. equities might be at record levels, but sentiment has been lukewarm with investors trying to figure out whether the Federal Reserve is going to start tapering its generous monetary stimulus sooner than expected.

The bull market is also sort of caught between strong economic data and the spread of the Delta variant of the coronavirus, which some believe could derail the economic recovery. Soaring inflation isn’t helping either.

All of this is helping drag Qorvo Inc’s share price lower. Taking this in context with the company’s strong financial results and investor upgrades has put this Qorvo stock in an even better trading range.

Of the analysts providing a 12-month share price forecast for QRVO stock, their average price target is $224.15, with a high estimate of $250.00. This points to potential upside of 23.5% and 38%, respectively.

Chart courtesy of StockCharts.com

QRVO Stock Overview

Qorvo provides technologies and radio frequency (RF) solutions for 5G and Wi-Fi networks, including the Internet of Things (IoT) and emerging applications for mobile, infrastructure, and defense/aerospace. (Source: “We Are Qorvo,” Qorvo Inc, last accessed August 19, 2021.)

Its segments include Mobile Products (MP) and Infrastructure and Defense Products (IDP).

The MP segment supplies RF solutions that perform various functions in the cellular radio front-end section of smartphones and other cellular devices.

Meanwhile, Qorvo Inc’s IDP segment is a supplier of RF solutions that support various global applications, including high-speed network connectivity to the cloud, data center communications, residential and commercial Internet connectivity, and upgraded military capabilities around the globe.

Strong Q1 Results

In early August, Qorvo announced that its revenue for the first quarter of fiscal 2022, which ended July 3, 2021, increased 41% year-over-year and 3.5% sequentially to $1.1 billion. (Source: “Qorvo Announces Fiscal 2022 First Quarter Financial Results,” Qorvo Inc, August 4, 2021.)

Its mobile chip sales were up 79% year-over-year thanks to higher 5G RF content per smartphone. The company’s IDP revenue slipped about 14% year-over-year to $274.0 million, versus an especially robust June 2020 quarter based on strong 5G infrastructure build-outs in China.

Qorvo Inc’s gross margin was 49.2%, compared to 41.4% in the same prior-year period and 49.3% in the preceding quarter. Its first-quarter 2022 operating income was $297.0 million, versus $92.7 million in the first quarter of fiscal 2021 and $293.0 million in the previous quarter.

The company reported first-quarter 2022 diluted earnings per share of $2.51, a 202% increase over the $0.83 per share recorded in the same period last year. However, it’s down slightly from the $2.60 per share in the fourth quarter of fiscal 2021.

Qorvo Inc’s president and CEO Bob Bruggeworth commented, “The Qorvo team delivered an exceptional June quarter, driven by product and technology leadership and multi-year technology upgrade cycles.” (Source: Ibid.)

Bruggeworth added, “End market demand is robust, and our outlook is strong. Qorvo is investing in new product areas and differentiated technologies to broaden our reach and extend our leadership in integrated RF modules and other products.”

Qorvo Inc Raises Full-Year Guidance

Meanwhile, Qorvo’s CFO, Mark Murphy, said, “In the September quarter, we expect strength in our business to continue. For the full fiscal year, we project gross margin to be above 52%. We also forecast another year of free cash flow growth while investing in capacity to support our outlook.” (Source: Ibid.)

For the quarter ending September 30, Qorvo Inc expects to report:

  • Quarterly revenue of $1.2 to $1.3 billion, compared to 2021 first-quarter revenue of $1.1 billion
  • A non-generally accepted accounting principles (non-GAAP) gross margin between 52% and 52.5%, versus 51.7% in the first quarter of 2021
  • Non-GAAP diluted earnings per share of $3.24 at the midpoint of guidance, compared to $2.43 in the first quarter of 2021

For the full year, Qorvo expects its revenue to advance 15% to 20% in the range of $4.6 to $4.8 billion, up from prior guidance of 15% revenue growth. Its adjusted gross margin is expected to exceed 52% for fiscal 2022.

Analyst Take

A leading provider of RF technology that makes 5G and the IoT a reality, Qorvo Inc is a financially robust company with tremendous long-term growth potential.

The company reported strong first-quarter results with revenue at the high end of its guidance. The company also provided strong guidance for the September quarter and full fiscal year (ending March 2022).

Qorvo Inc’s mobile segment should continue to enjoy tailwinds from rising 5G RF chip content per smartphone, and its IDP chip revenue is expected to round out over the long run.

All that is good news for Qorvo stock investors.