On Friday, Morgan Stanley made a significant adjustment to its stance on Richwave Technology (4968:TT) stock, shifting from an Underweight to an Overweight rating. The firm also notably increased the price target for Richwave to NT$288.00, a substantial rise from the previous NT$155.00. This change is grounded in the anticipation of a swift transition to WiFi 7 technology in the upcoming years.
The analyst at Morgan Stanley highlighted Richwave's advantageous position as a company that stands to benefit greatly from the next cycle of WiFi technology. With over 90% of its revenue derived from WiFi-related products, Richwave is considered a rare pure play in the WiFi 7 arena.
The company demonstrated robust business momentum during the 2020-21 WiFi 6 cycle but experienced a downturn as the WiFi 6E cycle failed to gain traction in the following years due to a lack of strong demand post-COVID-19 and no significant improvements in specifications.
Looking forward, the analyst projects a rapid increase in the penetration rate of WiFi 7, estimating it to reach between 20-30% in 2025, compared to just 5% in the second half of 2024.
This expected surge is likely to fuel significant revenue growth for Richwave, particularly through its WiFi front-end module (FEM) business. The company is forecasted to achieve a compound annual growth rate (CAGR) of 31% from 2023 to 2026.
Richwave is currently focusing on WiFi 7 projects, which comprise 80% of its undertakings, primarily in the router business. This concentration on the emerging technology positions the company to capitalize on the next wave of WiFi advancements.
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