Qorvo Inc: Should Investors Consider This Top 5G Stock on Pullback?

QRVO Stock Is a Top Pick for 5G Stock Investors

Instead of chasing the soaring tickers, some growth investors like to wait for pullbacks. If you are one of them, here’s a top 5G stock experiencing a pullback right now: Qorvo Inc (NASDAQ:QRVO).

Qorvo is a semiconductor company that makes radio-frequency (RF) connectivity solutions. Because the company doesn’t sell products to end consumers directly, it’s not as well known as some of the other 5G stocks.

Nonetheless, Qorvo stock is well positioned for the 5G era. The company has established a strong presence in multiple high-growth global markets, including advanced wireless devices; wired and wireless networks; and defense radar and communications.

Long-term investors of this 5G stock have already been handsomely rewarded: QRVO stock is up 85% over the last 12 months and 295% over the last five years.

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Looking at the most recent Qorvo stock chart, though, after reaching an intra-day high of $201.68 on April 29, the stock had a rather sharp drop. Trading around $182.85 at the time of this writing, QRVO stock is down more than nine percent from that high.

Qorvo Inc (NASDAQ:QRVO) Stock Chart

Chart courtesy of StockCharts.com

Obviously, stocks can move for a variety of reasons. Also, even after the recent pullback, I wouldn’t call Qorvo stock exactly cheap. But for investors who are willing to own 5G stocks for the long term, Qorvo could represent an opportunity.

The company reported earnings on May 5. The report showed that, in the fourth quarter of its fiscal year 2021, which ended April 3, Qorvo generated $1.1 billion of total revenue, representing a 36% increase year-over-year. That’s a very impressive top-line growth rate. (Source: “Qorvo Announces Fiscal 2021 Fourth Quarter Financial Results,” Qorvo Inc, May 5, 2021.)

The bottom-line result was even more impressive. The company’s adjusted earnings came in at $2.74 per share, up 75% from the $1.57 per share reported for the year-ago period.

The numbers also substantially outperformed Wall Street’s expectations. On average, analysts were projecting adjusted earnings of $2.43 per share on sales of $1.0 billion. In other words, while the stock seemed like it was taking a break lately, the company’s business continued to grow.

And that growth is expected to continue.

For the June quarter, management expects Qorvo Inc to generate revenue of $1.1 billion and adjusted earnings of approximately $2.45 per share. To put that in perspective, Qorvo earned an adjusted profit of $1.50 per share and sales of $787.5 million in the prior-year June quarter.

Note that 5G was one of the company’s main growth drivers for the past quarter, and it should continue acting as a catalyst.

In the latest earnings conference call, Qorvo’s president and chief executive officer, Robert Bruggeworth, said, “Our performance was driven primarily by 5G smartphones and Wi-Fi 6 and 6E. Demand was broad-based across customers and design activity suggest continued strength in fiscal 2022, supported by multiyear trends in wired and wireless connectivity markets.” (Source: “Qorvo, Inc.’s (QRVO) CEO Robert Bruggeworth on Q4 2021 Results – Earnings Call Transcript,” Seeking Alpha, May 5, 2021.)

The company expects 5G smartphones to double in calendar-year 2021, compared to 2020. And within these 5G handsets, Qorvo Inc expects the RF content to increase by $5.00 to $7.00 per phone, compared to their 4G counterparts.

Because of the continued deployment of 5G networks, Qorvo sees “tremendous opportunity in 5G infrastructure globally over the next four to five years.” (Source: Ibid.)

The bright outlook for Qorvo Inc’s business has allowed its board of directors to approve a $2.0-billion share repurchase authorization. Considering that the company has a market capitalization of about $21.0 billion today, that’s quite a sizable buyback program.

Over time, the program will reduce the number of shares outstanding, allowing each remaining QRVO stock investor to own a larger portion of the company.

Analyst Take

The overall market seems a bit undecided at the moment, and if you read mainstream financial media, you’ll see plenty of reasons to be concerned. In other words, it could be hard to forecast the near-term performance of individual stocks.

That said, Qorvo Inc’s potential in the 5G era should translate to bullish momentum in the long term. Patient investors could use Qorvo stock’s recent pullback as an opportunity.