Option Trade
Qorvo Inc (NASDAQ:QRVO) Calls 
Thursday, June 11, 2015

**OPTION TRADE: Buy the QRVO Aug 2015 85.000 call (QRVO150821C00085000) at or under $5.00. Place a protective stop loss at $2.00, and a pre-determined sell at $12.50.

by Ian Harvey

June 11, 2015

Introduction

Qorvo Inc (NASDAQ: QRVO), formerly Rocky Holding, Inc, being a provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure, and aerospace and defense applications, is moving into the S&P 500 Thursday evening due to a space being vacated with Reynolds American (NYSE:RAI) buying tobacco rival Lorillard (NYSE:LO). A company within this index has a market capitalization of over $5.3 billion with at least half the outstanding shares available for public trading.

Besides sales increasing greatly as Qorvo, which makes premium bulk acoustic wave (BAW) filters for smartphones, and makes these circuits critical for 4G devices in crowded urban environments, has seen vendors jumping into 4G – the move to the S&P 500 puts the company at the front and center on thousands of news and data feeds. It will also allow certain major pension funds to buy QRVO for the first time, and force several SPX-oriented ETFs to add shares as well.

Over the past 18 months, QRVO has put in two huge rallies averaging 163.4%. A similar move off the recent touch at the bottom of the trend would see QRVO hit the $170 mark by the end of the year.

Technical Details

Qorvo traded up 3.06% yesterday, hitting $82.50. Qorvo has a 1-year low of $63.02 and a 1-year high of $86.75. The stock has a 50-day moving average of $81.76 and a 200-day moving average of $81.35.

Earnings

Previous Earnings

Qorvo last issued its quarterly earnings data on Wednesday, May 6th. The company reported $1.11 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.87 by $0.24. The company had revenue of $634.90 million for the quarter, compared to the consensus estimate of $623.40 million. The company’s quarterly revenue was up 46.4% on a year-over-year basis. On average, analysts predict that Qorvo will post $5.04 earnings per share for the current fiscal year.

Future Earnings

According to analysts, Qorvo, Inc. is expected to report earnings per share for the current fiscal quarter of $0.98. This is the consensus mean estimate based on the individual covering sell-side analysts’ reported numbers. The company last reported earnings for the period ending on 2015-03-31 of $0.93 for the most recent quarter.

Why Qorvo?

Shaped from the merger of RF Micro Devices and TriQuint Semiconductor on Jan 2, 2015, Qorvo has brought all the critical radio frequency components that are essential for fabricating mobile devices under a common platform, thereby creating an undisputed market leader with a diversified product portfolio. These include power amplifiers (PAs), power management integrated circuits (PMICs), antenna control solutions, switch-based products and premium filters. With global smartphone users predicted to triple to 5.6 billion by 2019, the company is expected to generate relatively higher revenues.

The company also serves the infrastructure and defense/aerospace industries with advanced gallium nitride (GaN) solutions for additional applications, and foundry services to support radar, next generation base stations, optical communications and the Internet of Things. With a broad product portfolio and an improved operating model, this Zacks Rank #1 (Strong Buy) stock has created new revenue-generating opportunities in three large global markets, namely, mobile devices, network infrastructure and aerospace/defense.

Qorvo is expected to leverage the core strengths of both the merged companies to rapidly translate research and development advances into large scale production. In addition, synergistic benefits from the merger is likely to increase profitability through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses. The transaction is expected to generate $75 million of cost savings in the first year of its operation, followed by another $75 million in the second year. The deal is also expected to be accretive to non-GAAP earnings in the first full fiscal year of its operation.

Analysts Opinions

The company has been the subject of a number of research reports:-

• Analysts at Goldman Sachs initiated coverage on shares of Qorvo in a research note on Friday, May 22nd. They set a “buy” rating and a $98.00 price target on the stock.

• Analysts at Zacks upgraded shares of Qorvo from a “hold” rating to a “strong-buy” rating and set a $86.00 price target on the stock in a research note on Tuesday, May 12th.

• Analysts at Northland Securities raised their price target on shares of Qorvo from $82.50 to $88.50 and gave the company an “outperform” rating in a research note on Friday, May 8th.

• Finally, analysts at Canaccord Genuity raised their price target on shares of Qorvo from $85.00 to $89.00 and gave the company a “buy” rating in a research note on Thursday, May 7th.

Shares of Qorvo have received an average recommendation of “Buy” from the seventeen brokerages that are currently covering the company. Two analysts have rated the stock with a hold rating, thirteen have assigned a buy rating and two have issued a strong buy rating on the company. The average 1-year target price among brokerages that have updated their coverage on the stock in the last year is $87.04.

Conclusion

Qorvo is headquartered in Greensboro, NC, and the company will be added to the S&P 500 GICS (Global Industry Classification Standard) Semiconductors Sub-Industry index.

Qorvo, Inc. showed itself as moving stock, and its beta value stands at 0.89 times and price to earnings ratio was 30.79.

Therefore, based on the facts above the following option trade is recommended…..


**OPTION TRADE: Buy the QRVO Aug 2015 85.000 call (QRVO150821C00085000) at or under $5.00. Place a protective stop loss at $2.00, and a pre-determined sell at $12.50.



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