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Despite Semiconductor Fears, Brean Still Buying Qorvo Shares

Despite Semiconductor Fears, Brean Still Buying Qorvo Shares - QRVO

Qorvo Inc QRVO reported strong June quarter results, with the revenue and EPS beating the consensus expectations.

Brean Capital’s Mike Burton reiterated a Buy rating on the company, with a price target of $62.

Positive On The Stock

“While the revenue and EPS upside and momentum should continue into the Sep-16Q, QRVO informed investors that after seeing disappointing GMs in the June Q, gross margins are expected to decline again Q/Q in the Sep-16Q,” Burton mentioned.

The analyst believes this announcement was likely to trigger fear for any semiconductor investor, regardless of which company it was or the size of the EPS guidance raise.

Burton prefers to remain positive on the stock, despite the near-term leverage challenges, given that Qorvo sees a path back to gross margins of 50 percent, “as the business moves to a better mix of BAW filers and they execute on other initiatives that the company outlined such as wafer conversion and better yields, which will result in cost cuts.”

September Quarter Guidance

The revenue momentum has continued in the September quarter, with continued acceleration in order activity in July, across all Qorvo products.

Management guided to September quarter revenue of $820–$850 million, with the midpoint representing 19 percent quarter-on-quarter growth. The company expects this growth to be driven by the Mobile segment.

In addition, Qorvo’s EPS guidance for the September quarter is ahead of the consensus forecast at the midpoint.

Qorvo was seen trading down 8.56 percent in Wednesday's pre-market session, trading at $56.19.

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DateFirmActionFromTo
Aug 2016Goldman SachsMaintainsNeutral
Aug 2016MKM PartnersMaintainsBuy
Jul 2016Mizuho SecuritiesDowngradesBuyNeutral

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