Qorvo, Inc. QRVO has demonstrated impressive price performance over the last two years. The stock, which was valued at $40 at the beginning of February2016, now currently trades close to $80.1, reflecting an almost two-fold jump.
Year to date, shares of Qorvo have returned approximately 20.2% substantially outperforming the industry’s rally of 1.1%. In the same period, the stock has also fared better than the S&P 500 index’s rise of 10.1%.
The outperformance can primarily be attributed to robust mobile growth in China, improved progress in Infrastructure and Defense (“IDP”) and stringent cost control measures.
We believe Qorvo is well poised to gain from solid demand of its performance-tier for radio frequency (“RF”) Fusion based solutions as well as for antenna tuning, discrete components and Bulk Acoustic Wave (“BAW”) based multiplexers.
Let’s delve deeper and analyze the factors driving the stock.
What's Driving the Stock?
Expanding Product Portfolio: Key Catalyst
The company’s cellular RF and WiFi solutions find considerable application in a variety of mobile devices, including smartphones, notebook computers, wearables, tablets, and cellular-based applications.
Moreover, robust adoption of the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi and emerging IoT applications) is noteworthy.
Qorvo recently partnered LEEDARSON in a bid to offer a range of smart home lighting solutions combining Zigbee 3.0 with Bluetooth Low Energy (“BLE”) 5.0 protocols. The partnership is aimed at delivering IoT standard solutions.
Per IDC estimates, smart home lighting product market is projected to grow at a CAGR of 26% from $1 billion in 2017 to reach $3.5 billion in 2022, enhancing the prospects of the upcoming solutions.
The company is well-positioned to win some of the industry's highest growth opportunities by leveraging its diversified product portfolio, systems-level expertise, R&D and manufacturing scale as well as internal assembly and test capabilities.
Accelerated 5G Deployment Bodes Well
Accelerating timeline for 5G deployment is a tailwind for Qorvo. The company has participated in dozens of 5G field trials and demonstrations.
The company has introduced new front end modules (FEMs) supporting frequency bands ranging from 3GHz (gigahertz) to 39GHz in the recent past. The FEMs can function on both pre-5G and 5G architecture. Qorvo’s GaN technology enables the FEMs to support the emerging 5G infrastructure.
Introduction of the new products strengthens Qorvo’s GaN portfolio and provides it a competitive edge, in the relevant market. The company is capitalizing on the lucrative prospects in defense by rendering effective GaN solutions.
Positive Earnings Surprise History
Qorvo has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 9.9%.
Encouraging Estimate Revisions
Over the last 60 days, fiscal 2019 estimates were revised, driving the Zacks Consensus Estimate to $6.19 per share from $5.94 per share. The figure reflects year-over-year growth of 29.5%.
Further, the company has a long-term expected EPS growth rate of 11.9%.
Zacks Rank and Other Stocks to Consider
Qorvo carries a Zacks Rank #2 (Buy).
Paycom Software, Inc. PAYC, Aspen Technology, Inc. AZPN and Logitech International S.A. LOGI, in the broader technology sector are worth considering. All the three sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Paycom, AspenTech and Logitech are currently pegged at 24.8%, 16.5% and 8%, respectively.
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