Qorvo's Success Is Not Tied to Apple

Strong guidance shows the company has a lot more to it

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May 27, 2016
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The underperformance of Apple’s (AAPL, Financial) iPhone 6S has had a negative impact on Apple’s suppliers as well. Companies like Skyworks Solutions (SWKS, Financial), Jabil Circuit (JBL, Financial), etc., have underperformed the market because of the falling sales of the iPhone 6S.

However, one company that has managed to buck this downtrend is Qorvo (QRVO, Financial). Despite Apple’s woes, Qorvo has managed to perform nicely this year and has outperformed its peers. Qorvo’s better-than-expected earnings report along with its strong guidance helped the stock beat the market, and I expect it to be immune from Apple’s concerns for the remainder of this year as well.

Qorvo’s fourth-quarter earnings report was stellar as the company reported sales of $607 million, down 12% year over year, beating the analysts’ estimates by nearly $8 million. On the earnings front, Qorvo reported EPS of $1.04, surpassing the consensus target by 12 cents.

The huge beat wasn’t the best part of Qorvo’s quarterly results as the company also issued strong guidance for the first quarter. Despite Apple slashing its revenue guidance, Qorvo expects first-quarter revenue of $650 million and EPS of $1.05, above a consensus of $625.8 million and 96 cents.

The primary reason behind Qorvo’s strong guidance may by the stellar performance of Samsung’s Galaxy S7. The Galaxy S7 is selling a lot better than the Galaxy S6. In fact, sales are reported to be 20% higher than the Galaxy S6.

Since Qorvo is a Samsung (SSNNF, Financial) supplier as well, the soaring sales of the Galaxy S7 may have helped it offset the losses it incurred from Apple. With one more quarter to go before the launch of the iPhone 7, Apple will likely report a bad quarter again. However, Qorvo’s success is not tied to Apple anymore as evident by the company’s strong guidance and stellar earnings report.

In addition to Galaxy S7’s success, it was also recently reported by Taiwan’s Economic Daily News that Apple has ordered contract manufacturers to produce 72 million to 78 million iPhone 7 units this year, a record figure for a new iPhone and way above the consensus estimates of 65 million.

Conclusion

The combined success of the iPhone 7 and the Galaxy S7 can push Qorvo higher in the next few quarters. With the company already reporting strong earnings, the success of the iPhone 7 should see the stock head much higher. Investors can consider buying Qorvo at these levels.

Disclosure: The author doesn’t have any position in the stock mentioned in the article.

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