Qorvo: Broad-Based Growth Makes It a Good Investment
Chipmaker Qorvo (QRVO) recently reported decent results for the first quarter. The company's revenue increased 6% to $672.7 million, along with a slight increase in the net income. Additionally, Qorvo also provided a decent outlook for the ongoing quarter as it expects revenue of $690-$710 million, representing sequential growth of 4%.
Defense prospects are strong
The improvement in Qorvo's results was driven by traction in the CATV, defense, and aerospace markets. Looking ahead, this segment will continue driving Qorvo's results as the defense infrastructure market is growing at an annual rate of over 5%.
For instance, Qorvo is focused on implementing a differentiated business strategy. It is partnering with the industry leaders in radar, optical, base stations, Wi-Fi and cable/broadband. Moreover, it is focused on maintaining technology leadership by leveraging department of defense funding to deliver innovation and supporting commercial markets with advanced GaN & BAW products. But, more importantly, Qorvo is also focused on tapping growth in the mobile market where the transition to 4G is gaining pace.
Focusing on mobile
Qorvo is engaging with mobile operators to enhance spectral efficiency and improve their returns on spectrum investments. The company is growing its design traction with BAW-based RF Fusion in popular smartphones and with advanced LTE reference designs. In addition, Qorvo has extended its association with a key LTE baseband supplier to address uplink carrier consolidation for a major Chinese market.
Qorvo recently began shipments of the RF Flex to major smartphone manufacturers of China. The company achieved initial production orders for sophisticated superior-performance LNAs from a major smartphone manufacturer. Also, Qorvo has been selected by a key developer of communication equipment to provide GaN PA in first-responder all-band handheld radio, substituting LDMOS Pas.
Also, it has strategically gained Wi-Fi CPE 5GHz PA reference design wins. Recently, Qorvo achieved production orders for BAW-based RF Fusion Mobile Wi-Fi iFEM for a popular Android smartphone as well. Moreover, it has achieved several design wins for varied wearable applications.
The unique collaboration of Qorvo with industry leaders in mobile communications technology will substantially expand its customer base and provide it with an opportunity to manufacture and offer advanced and diverse solutions to its customers.
As a result of its strong growth across segments, Qorvo has announced yet another share repurchase program. The company recently completed its $200 million share repurchase program in February 2015 and bought back nearly 3.1 million shares of common stock priced at an average of $63.80 per share. As a result, on account of the growing traction of its business, the company has now declared a new share buyback program to repurchase approximately $400 million worth of its common stock.
Hence, Qorvo is making a number of positive moves that will positively impact its performance going forward. Moreover, it is evident that it is a shareholder-friendly company. Looking ahead, I believe that Qorvo will continue to improve its financials and its valuation also indicates the same. The company has trailing and forward P/E ratios of 39.57 and 10.22, respectively.
More importantly, Qorvo's forward P/E is much lower than the industry's average P/E of 19.48. In addition, the PEG ratio of 0.85 also indicates that Qorvo is undervalued. Thus, Qorvo looks well-positioned for more gains going forward, and the company has a strong cash position of $558 million to fund its expansion moves, while the absence of any debt is another positive. Thus, investors should remain invested in Qorvo for long-term gains.