Qorvo’s (QRVO, Financial) shares were hammered yesterday when the company released its Q2 earnings. Although Qorvo beat the earnings estimates, shares plunged 15% in aftermarket trading due to soft guidance. The company blamed the slowdown in China for its guidance and while it will have a negative effect on Qorvo’s sales going forward, I think the selloff was a massive overreaction, and the stock is a strong buy at present prices.
Qorvo has been beating estimates consistently and the company has diversified its revenue stream, and I believe this will offset the slowdown in Chinese market going forward.
Targeting GaN market
Gallium Nitride (GaN) is needed to make further high-tech advancements in the defense and commercial markets. Qorvo, a leading provider of core technologies and RF solutions for mobile, infrastructure and aerospace/defense applications, stated a new and innovative family of input-matched gallium nitride transistors in a low-cost plastic package intended to enable cost effective commercial and military radar and radio communications systems.
GaN has several advantages over conventional silicon products, and consequently, the GaN market is expected to grow at 9% CAGR to over 18% of RF device market by 2020.
Qorvo's input-matched GaN transistors have become very popular as they are cost effective. They can be optimized for power and efficiency within the band, allowing RF systems to have greater flexibility and simplified board designs. The company is expanding the range of GaN transistors to comprise low-cost plastic packaging. Qorvo delivers customers with cost-effective, scalable GaN solutions that are also extremely power efficient.
| Part Number | Frequency Range (GHz) | Output Power (p3dB) | PAE% | Linear Gain (dB) | Packaging (mm) |
| TGF2965-SM | 0.03-3.0 | 6.0W at 2 GHz | 63% | 18 at 2 GHz | 3x3 plastic QFN |
| TGF3020-SM | 4.0-6.0 | 6.8W at 5 GHz | 59% | 12.7 at 5 GHz | 3x3 plastic QFN |
| TGF3015-SM | 0.03-3.0 | 11.0W at 2.4 GHz | 62% | 17.1 at 2.4 GHz | 3x3 plastic QFN |
| TGF3021-SM | 0.03 -4.0 | 36.0W at 2 GHz | 72% | 19.3 at 2 GHz | 3x4 plastic QFN |
Another plus
Qorvo introduced new high-performance Silicon-on-Insulator (SOI) parts ultimate for broadband communications systems. The extremely integrated parts expressively decrease external components however lowering cost, power consumption, and weight in wireless infrastructure, test and measurement, and defense and aerospace applications.
These newly introduced SOI components feature the broadband performance that customers expect from Qorvo's products. With exceptional linearity, robust power handling, and no external components, this portfolio is already in demand, even in the sampling stage.
Qorvo now proposes the following RF switches:
1- Temperature compensating attenuator (TCA)
2- Digital step attenuators (DSA)
3- Programmable array of capacitors (PAC)
Exposure to Apple
Qorvo does have a great exposure to Apple (AAPL, Financial). This is presently a virtuous thing as Apple's iPhone 6 is experiencing strong sales. If for certain reason Apple products drop in popularity, Qorvo will have to sell to other companies to sustain and cultivate its market share. I don't think that Apple's products will ever decline in popularity any time in a little while. If that does occur, Qorvo can emphasize delivering the most popular device producers at any given time. The company is benefiting from strong dollar content in Apple devices, and I expect this trend to continue.
Conclusion
Qorvo’s post-earnings selloff is unwarranted, and this has opened up a great buying opportunity for investors. The company has a diversified revenue stream and will likely offset the slowdown in China by growing in other markets. Qorvo is a strong buy on the pullback.
