Qorvo shares dropped after Bank of America downgraded the wireless product company to neutral and cut its price target to $190.

DAN WEIL
NOV 4, 2021 11:05 AM EDT, TheStreet.com

Qorvo QRVO shares dropped on Thursday after Bank of America downgraded the wireless product company to neutral from buy and cut its share-price target to $190 from $225.

Qorvo faces headwinds for supply and demand, analyst Vivek Arya said. The company reported earnings Thursday.

“We like QRVO's execution amid a challenging supply environment and its moves to diversify away from smartphones,” he wrote in a commentary.

“However, we forecast year-on-year sales growth decelerating to 11%/5% in calendar years 2022/2023 versus 22% in 2021.

That, “coupled with near-record margins, suggests to us a more muted growth trajectory in the near to medium term.”

Qorvo stock recently traded at $154.69, down 13%. In the past six months through Wednesday's close, the stock had eased 2.4%.

“We believe 5G smartphone adoption will likely get down to more normalized levels in the next two years, which coupled with rising competition from Qualcomm (QCOM), Skyworks (SWKS), and Broadcom (AVGO) could limit growth reacceleration,” Arya said.

“On the positive side, the balance sheet is relatively strong and management has executed well with several strategic moves to diversify sales.”

That includes the acquisition of United Silicon Carbide to expand into the auto/industrial power device sectors, he said.

“The balance suggests a return to a historical 13 to 15 forward price-earnings multiple, in line with peers QCOM, SWKS and Cirrus (CRUS).”

For the second quarter ended Oct. 2 Qorvo earned $2.84 a share, more than double the $1.18 a share of the year-earlier quarter. Revenue reached $1.26 billion, up 18% from $1.06 billion.

Morningstar analyst Brian Colello maintained fair value for Qorvo stock at $190.

For the December quarter, Colello said, Qorvo expects revenue to range $1.09 billion to $1.12 billion.

"At the midpoint, sales will be down 12% sequentially and up only 1% year over year, a far cry from management’s hint a quarter ago (and FactSet consensus estimates) of revenue in the $1.25 billion range," he said.