Apple Supplier Qorvo (QRVO) Trims Q4 View On Coronavirus Woes

Qorvo, Inc. (NASDAQ:QRVO) recently provided an update on fourth-quarter fiscal 2020 outlook.

The company now anticipates fourth-quarter fiscal 2020 revenues to be approximately $770 million, down from its prior range of $800-$840 million (mid-point of $820 million) citing reduced customer demand owing to coronavirus outbreak and its impact on smartphone supply chain.

The revised revenue outlook reflects a decline of 6.5% considering mid-point level of the prior guided range. The Zacks Consensus Estimate is currently pegged at $818.73 million.

Qorvo has not provided any updates on prior guided financial metrics. Per the guidance issued on Jan 29, 2020, Qorvo anticipated non-GAAP gross margin to be 48.5% and non-GAAP earnings of $1.55 per share for fourth-quarter fiscal 2020. The Zacks Consensus Estimate for earnings is currently pegged at $1.55 per share.

Following the news, shares of Qorvo were down 2.1% on Mar 3, 2020.

Notably, the company’s stock has returned 40.8% in the past year, outperforming the industry’s rally of 25%.

Key Takeaway

Notably, Apple (NASDAQ:AAPL) accounted for 32% of company’s total revenues in fiscal 2019. Qorvo’s low-band power amplifier/duplexer (PAD) filters are utilized in Apple’s iPhones.

However, the iPhone maker recently issued an investor update stating that the company does not anticipate meeting the revenue guidance provided on Jan 28, 2020 for second-quarter fiscal 2020.

Apple is known to keep its suppliers on their toes wherein slight changes in demand/supply of iPhone-related devices create a stir among the company’s supplier base.

Although customer concentration due to significant exposure to Apple is a headwind in the near term owing to COVID-19 impact, strength in Qorvo’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi and emerging IoT applications) bode well.

5G Initiatives & End-Market Diversification: Key Catalysts

Accelerating timeline for 5G deployment bodes well for Qorvo. The company is supplying products for more than 20 5G field trials. Further, rapid adoption of GaN for high-power applications deserves a special mention.

Its GaN technology also enables Front-End Modules (FEMs) to support the emerging 5G infrastructure.

The company has introduced FEMs that can function on both pre-5G and 5G architecture. Qorvo has also unveiled gallium arsenide (or GaAs) FEM, QPF4010, to aid 5G millimeter wave (mmWave) base stations in supporting additional capacity. Recent acquisition of Custom MMIC is expected to aid Qorvo expand mmWave capabilities and bolster Infrastructure and Defense (IDP) business.

Moreover, the company is benefiting from increased demand in the performance tier for Radio Frequency (RF) Fusion based solutions and Bulk Acoustic Wave or BAW-based multiplexers.

In the connected car domain, the company introduced a complete V2X front-end solution, featuring 5.9 gigahertz Wi-Fi coexistence BAW filters, which are gaining traction among automotive OEMs and Tier 1 suppliers.

Further, Decawave acquisition is expected to strengthen Qorvo’s Mobile Products (MP) segment with ultra-wideband (UWB) technology capabilities and bolster demand across mobile, automotive and IoT end markets.

With a broad product portfolio and recent strategic acquisitions, Qorvo is well poised to diversify end-markets beyond mobile devices to network infrastructure and aerospace/defense domains, as well. This is expected to cushion the stock amid coronavirus-led supply chain disruption in smartphone vertical.

Zacks Rank & Other Key Picks

Qorvo currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader technology sector are Microchip Technology Inc. (NASDAQ:MCHP) and Garmin Ltd. (NASDAQ:GRMN) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Microchip and Garmin is currently pegged at 13.28% and 7.35%, respectively.

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