Qorvo, Inc. (QRVO) is the leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. Its stock price has more than doubled since hitting its 52-week low of $67.54 on March 23, 2020. The stock has gained 141.5% since then to close yesterday’s trading session at $171.13, surpassing the tech-heavy Nasdaq’s 101.6% returns.
QRVO supplies RF chips to several major smartphone companies, including Apple Inc. (AAPL) and Samsung. So, it is strategically positioned to gain from the growing 5G market.
But with the adoption of 5G growing in several other sectors, such as automobile and healthcare, we believe QRVO should witness even greater demand for its chips in the coming months.
Here is why QRVO could maintain the momentum:
Increasing Adoption of 5G
QRVO should witness significant demand for its core technologies and RF systems in the booming 5G smartphone market.
Besides supporting the global rollout of 5G network enabled smartphones, the company has been selected to supply 5G/LTE, C-V2X and Wi-Fi automotive-qualified products to multiple original equipment manufacturers (OEMs). including Audi, Bayerische Motoren Werke Aktiengesellschaft (BMWYY) and Aktiebolaget Volvo (VLVLY).
Impressive Historical Growth
QRVO’s revenue has increased at a CAGR of 8.1% over the past three years. The company’s EBITDA and EPS increased at CAGRs of 16.3% and 165.9%, respectively, over the same period. This can be attributed to its continuous product innovations over the years.
Impressive Recent Financials
The company’s revenue increased 26% year-over-year to $1.09 billion for the fiscal 2021 third quarter ended January 2. Its net income increased 24.6% year-over-year to $201.04 million and its non-GAAP EPS increased 65.6% year-over-year to $3.08.
In addition, QRVO surpassed a consensus EPS estimates in each of the trailing four quarters.
Favorable Analyst Sentiment
Analysts expect the company’s revenue to increase 32.1% for the quarter ending March 31, 2021 and 23% in fiscal 2021. Its EPS is expected to grow 54.8% for the quarter ending March 31, 49.6% in fiscal 2021 and at a rate of 16.5% per annum over the next five years.
The stock has an average broker rating of 1.62. Of 23 Wall Street Analysts that have rated the stock, two have rated it ‘Strong Buy’ and 15 have rated it ‘Buy.’
POWR Ratings Show Promise
QRVO has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. QRVO has an A grade for Growth. This is consistent with analyst expectations that its revenue and EPS will increase.
The stock also has an A grade for Quality, given its impressive gross profit margin of 45.5%, among other favorable qualitative aspects.
In addition, QRVO has a B grade for Sentiment, which is sync with the favorable analyst sentiment.
We have also given QRVO grades for Momentum, Stability and Value. Get all QRVO’s ratings here.
Of 96 stocks in the B-rated Semiconductor & Wireless Chip industry, QRVO is ranked #14.
There are several other top-rated stocks in the same industry. Click here to access them.
QRVO is well-positioned to gain from the growing 5G market based on its financial strength and increasing customer base.
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QRVO shares were trading at $180.03 per share on Friday afternoon, up $8.90 (+5.20%). Year-to-date, QRVO has gained 8.28%, versus a 4.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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