Qorvo stock slid after the maker of chips for mobile phones provided a disappointing outlook. Shares of rival Qualcomm are surging.
DreamstimeQorvo stock is trading sharply lower on Thursday after the maker of chips for mobile phones provided a disappointing outlook for the December quarter, raising questions about both the impact of chip shortages and the potential loss of market share to Qualcomm and other rivals.
For the fiscal third quarter ended Oct. 2, Qorvo (ticker: QRVO) posted revenue of $1.255 billion, up 13% from a year ago, and a smidge ahead of the Street at $1.25 billion. Non-GAAP earnings per share were $3.42, ahead of the Street consensus estimate for $3.25.
But guidance for the December quarter disappointed. The company projects revenue of $1.09 billion to $1.12 billion, with non-GAAP EPS of $2.75, falling short of the old Street consensus estimates for $1.25 billion and $3.25, respectively. Qorvo sees full-year fiscal 2022 revenue growth of 15%.
“After achieving a record September quarter, we expect December quarter revenue to decrease sequentially amidst ongoing supply challenges and other factors impacting global smartphone demand,” Qorvo Chief Financial Officer Mark Murphy said in a statement. Qorvo is seeing challenges in sourcing enough chips while also suffering softer demand, in particular in Asia.
Qorvo stock is down 11.7%, to $157.31, while Qualcomm (QCOM) stock is surging 11.7% to $154.67.
BofA Global Research analyst Vivek Arya responded to the report by cutting his rating on Qorvo to Neutral from Buy, with a new target price of $190, down from $225. Arya points out in a research note that Qorvo is seeing both supply and demand headwinds. He sees the company’s growth in calendar 2022 falling to 11% from 22% in calendar 2021. “All-in, we believe 5G smartphone adoption will likely get down to more-normalized levels in the next two years, which coupled with rising competition could limit growth re-acceleration,” he writes.
Susquehanna Financial Group analyst Christopher Rolland, who repeats his Neutral rating on the stock, cut his target price to $175 from $200. He has doubts about the company’s expectations that conditions should improve in the March quarter, and wonders if Qorvo’s outlook has been hampered by competitive issues, particularly against Qualcomm, which late Wednesday reported strong September-quarter earnings that included 45% growth in its RF radio segment that competes with Qorvo.
“This raises a bigger, longer-term question for us,” Rolland writes. “Can Qorvo continue to post significant growth numbers in a market in which Qualcomm is growing…so quickly off what is now a sizable base? We now expect Qualcomm to post $1.4 billion in RF revenue in the December quarter (from just $400 million a quarter just a few years ago).” Adds Rolland: “We can’t help but imagine that Qualcomm’s bundled solutions or high supply availability may have pressured Qorvo’s share and outlook…but time will tell.”
Raymond James analyst Chris Caso is more optimistic—he thinks the company’s issues should be short-term in nature. “While Qorvo’s ability to supply remained tight, Qorvo said demand deteriorated over the past three weeks, presumably as customers had built too much inventory in response to those tight supply conditions, and as demand for handsets in China weakened,” he writes in a research note “Nonetheless, the company does expect a better-than-seasonal March quarter, which limits the impact to full-year numbers. We view this situation to be analogous to what recently happened in memory, in which customers built inventory of some components yet remain constrained on others.” Caso keeps his Outperform rating and $220 target on Qorvo stock.
Write to Eric J. Savitz at eric.savitz@barrons.com
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