TriQuint Semiconductor (TQNT) has been a good performer in the past and the stock has gained more than 60% in the last year. With Apple (AAPL) being its major customer and the proposed merger with RF Micro Devices, the semiconductor maker has attracted many investors. With everything working smoothly, let's find out if TriQuint is a good buy or not.
TriQuint is confident of outperformance in 2014 due to strategic moves undertaken in 2013. The company is expecting its profit margin to grow by 500 basis points in 2014. With the growing smartphone market, strong base station demand and cost reduction initiatives, TriQuint is expecting a better future.
The company is well positioned to benefit from the growing LTE platform. TriQuint is broadening its product portfolio by introducing new products in both the handset and the infrastructure market. The company is expecting this shift to improve its profitability. With the growing seasonal demand from customers such as Samsung, Huawei and ZTE, the company is expected to benefit. In China, TriQuint is having great expectations. As the LTE platform is rolling out strongly in China, the company is seeing strong demand for TriQuint’s base-station products, and this could be a driving factor in the long run.
The company also deals in high value products such as discrete filters -- BAW and TC-SAW, MNPA, and integrated PA duplex modules. It is continually investing aggressively in these products to support the growing LTE demand across the globe. These high-value products led to growth in sales by 36% in the past. In line with the growing trend, the company is further expecting these to produce more gains.
Profiting from China
China is TriQuint’s prime focus. China Mobile is expecting sales of 200 million LTE handsets this year, giving enormous growth opportunities to the company. Thus, TriQuint is doing right by investing in developing high value products which will help it to improve its profitability in the future.
TriQuint’s prospects in LTE look strong in 2015. Besides this, TriQuint sees enormous growth with the filter market as it is expected to grow to approximately $2 billion by 2016. As a result of this, TriQuint is enhancing its R&D advancements to hold a profitable position in the future. In order to improve, TriQuint is reducing its revenue from lower margin products, including commodity power amplifiers and transmit modules. Hence, TriQuint looks firmly on track to deliver solid earnings growth in the future.
Better Times ahead
TriQuint is focusing on cost effectiveness. It has reduced its unused gas capacity to cut down costs further. TriQuint has a strong product portfolio as it has launched about 190 new products in 2013. The latest launch by the company is TV LTE, which is seeing good response in the Chinese market. With these advancements, TriQuint is focusing on a strong strategic position in the radio frequency industry. Moreover, TriQuint is targeting 400,000 base stations that are expected to be built in China in 2014 through its base station and optical products, and this could be an important growth driver going forward.
TriQuint is also expecting a lot from its RF Micro merger, as it is expected to help TriQuint to capture more market in mobile devices, network infrastructure, and the aerospace defense market. Despite solid gains this year, TriQuint remains in a good position to grow its business in the future. Hence, investors should remain invested in this chip stock as it can deliver further upside in the future.