by Ian Harvey
IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!
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Option Trade – Qorvo Inc (NASDAQ: QRVO) Calls
Tuesday, February 04, 2020
** OPTION TRADE: Buy the QRVO MAY 15 2020 110.000 CALLS at approximately $7.00.
Place a high pre-determined sell at $14.00.
Include a protective stop loss of $2.80.
Last week, Qorvo Inc (NASDAQ: QRVO) released its quarterly result to the market. The early response was not positive, with shares down 3.7% to US$106. Revenues were US$869m, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$1.36, an impressive 44% ahead of estimates.
But, Qorvo Inc. shares rallied in the extended session Wednesday after the radiofrequency chip maker's quarterly results and outlook topped Wall Street estimates. Qorvo shares surged 10% after hours, following a 0.9% decline in the regular session to close at $112.57.
Following the result, analysts have updated their expectations for Qorvo moving forward.
Taking into account the latest results, the most recent consensus for Qorvo from 21 analysts is for revenues of US$3.49b in 2021, which is a decent 11% increase on its sales over the past 12 months. Statutory earnings per share are expected to bounce 27% to US$3.70. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.41b and earnings per share (EPS) of US$4.05 in 2021.
And, next year brings more of the same, according to analysts, with revenue forecast to grow 11%, in line with its 9.7% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 8.3% next year. So it's pretty clear that Qorvo is forecast to grow substantially faster than its market.
Also, the consensus price target has risen 17% to US$127; which probably means that the forecast revenue growth is expected to offset the impact of the expected fall in earnings.
(Check out the analysts’ increases below in the “Analysts’ Section.”)
In the past week shares have pulled back in-line with the market movement. This provides a better entry price for this options trade.
Qorvo, Inc provides radio frequency (RF) solutions and technologies for mobile device, infrastructure, and defense and aerospace applications worldwide. It operates through Mobile Products (MP) and Infrastructure and Defense Products (IDP) segments. The MP segment offers cellular RF and WiFi solutions, bulk acoustic wave (BAW) and surface acoustic wave (SAW) filters, power amplifiers (PAs), low noise amplifiers (LNAs), switches, multi-band PAs and transmit modules, RF power management integrated circuits, diversity receive modules, antenna switch modules, antenna tuning and control solutions, modules incorporating PAs and duplexers, and modules incorporating switches, PAs, and duplexers.
The company reported fiscal third-quarter net income of $161.4 million, or $1.36 a share, compared with $69.5 million, or 55 cents a share, in the year-ago period. Adjusted earnings were $1.86 a share. Revenue rose to $869.1 million from $832.3 million in the year-ago quarter.
Analysts had forecast earnings of $1.68 a share on revenue of $852.1 million.
Qorvo expects fiscal fourth-quarter earnings of $1.55 a share on revenue of $800 million to $840 million, while analysts had forecast $1.15 a share on revenue of $726.3 million. "Qorvo's December quarter results and March quarter guidance reflect strength in our end markets of 5G, Wi-Fi and Defense and continued strong operating performance," said Mark Murphy, chief financial officer, in a statement.
The company posted solid sales into the 5G wireless, Wi-Fi 6, and defense communications markets. 5G smartphones featuring Qorvo chips are all the rage right now in China, South Korea, and Japan. Customer demand for Wi-Fi 6 started to pick up on a global level in the third quarter. The company's gallium nitride power amplifiers are running through the long development cycles in aerospace and defense applications, generating stable revenue streams.
Chips that power 5G connections in recent and upcoming smartphones are red hot right now. This trend should be followed by an even larger surge of 5G chip orders, destined for installation in Internet of Things devices. 2019 may have been rough, but Qorvo is looking like promising growth investments right now.
Qorvo’s benefited from continued solid demand for performance-tier for
RF Fusion-based solutions, antenna tuning, discrete components and Bulk
Acoustic Wave (BAW) based multiplexers.
The company is also benefited from increased RF content and other solutions at the China-based smartphone OEMs. This along with improved sales of Apple’s iPhone 11 in the December quarter and share gains in Samsung’s portfolio have contributed to the company’s top-line growth.
Qorvo Mobile Products division sales increased sequentially and returned to growth on a year-over-year basis, driven by an increase in 5G handset volumes.
Strong demand for the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi 6 and emerging IoT applications) is a positive. Rapid adoption of GaN for high-power applications, radars and other electronic warfare products have aided the IDP segment’s revenue growth.
During the quarter, Qorvo expanded its infrastructure solutions portfolio with dual-band integrated front-end module (FEM) — QPF4800 — designed for Wi-Fi 6 customer premise equipment.
The company also acquired Cavendish Kinetics to strengthen RF microelectromechanical system (MEMS), switching and tuning portfolio.
Qorvo had its price objective raised by Mizuho from $125.00 to $135.00 in a research note published on Wednesday morning. The firm currently has a buy rating on the semiconductor company’s stock.
Raymond James analyst Chris Caso boosted his target to $135 from $98, reiterating his outperform rating.
Caso called Qorvo's third-quarter performance “strong” and said the semiconductor company offered "much better" than seasonal guidance on the strength of its 5G business in China. The company’s earnings should continue to rise, boosted by high volume mobile phones switching to 5G technology, he said.
Bloomberg Intelligence took much the same stance. “The company's improved sales momentum is more than just the iPhone near term, as content increases with Samsung and Chinese vendor 5G launches fuel the strong revenue outlook,” Bloomberg Intelligence said in a report.
Summit Insights upgraded shares of Qorvo from a hold rating to a buy rating in a report released on Thursday.
Qorvo had its price objective boosted by Needham & Company LLC from $105.00 to $150.00 in a report published on Thursday. The brokerage currently has a buy rating on the semiconductor company’s stock.
BidaskClub upgraded shares of Qorvo from a hold rating to a buy rating in a report issued on Thursday, January 16th.
Qorvo had its price target hoisted by Canaccord Genuity from $110.00 to $135.00 in a research note published on Thursday. They currently have a hold rating on the semiconductor company’s stock.
Qorvo had its target price lifted by Morgan Stanley from $112.00 to $120.00 in a report released on Thursday morning. They currently have an equal weight rating on the semiconductor company’s stock.
Qorvo has a debt-to-equity ratio of 0.24, a current ratio of 3.45 and a quick ratio of 2.37. Qorvo has a 1 year low of $58.52 and a 1 year high of $122.37. The stock has a market capitalization of $12.30 billion, a P/E ratio of 36.63, a PEG ratio of 1.95 and a beta of 1.22. The business has a 50-day simple moving average of $114.47 and a 200-day simple moving average of $90.38.