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Taking Stock of Qorvo’s Risk Factors
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Taking Stock of Qorvo’s Risk Factors

Qorvo (QRVO), which caters to wireless devices, wired and wireless networks, and defense radar and communications markets via its radio frequency (RF) solutions, recently delivered better-than-expected performance for the second quarter fiscal 2022.

Let us take a look at Qorvo’s financials, as well as what has changed in its key risk factors that investors should know. (See Insiders’ Hot Stocks on TipRanks)

Q2 Financial Results

Revenue increased 18.4% year-over-year to $1.26 billion, exceeding consenus estimates by $4.33 million, while the gross margin of the company expanded to 49.5% from 46.4% a year ago.

Similarly, earnings of $3.42 per share exceeded consensus estimates by $0.17. The company had generated earnings per share of $2.43 in the comparable year-ago period.

Robert Bruggeworth, president and CEO of Qorvo, remarked, “We are sustaining investments in highly differentiated technologies and best-in-class products to extend our leadership and drive growth.”

He further added, “After the quarter closed, Qorvo acquired United Silicon Carbide, an innovator in silicon carbide power devices and a pioneer in silicon carbide junction-gate field-effect transistor (JFET). The addition of United Carbide leverages Qorvo’s wide bandgap competencies and expands our power franchise.”

After the robust Q2 showing, Qorvo anticipates a sequential decline in top line for the December quarter, due to current supply challenges and other factors affecting the global smartphone demand. However, in the March quarter, the company expects these factors to become moderate.

Qorvo anticipates revenue in the range of $1.09 billion to $1.12 billion for Q3 2022. Earnings are expected at $2.75 per share at the midpoint of the guidance.

Wall Street’s Take

On November 4, BMO Capital analyst Ambrish Srivastava reiterated a Hold rating on Qorvo and decreased its price target to $185 from $200 after the company lowered its expected Q4 earnings guidance. Qorvo anticipates a 15% growth in top line alongside a gross margin of over 52% for FY 2022.

Consensus on the Street is a Moderate Buy based on six Buys and nine Holds. The average Qorvo price target of $197.92 implies a potential upside of 264.2% for the stock.

Risk Factors

According to the new TipRanks Risk Factors tool, Qorvo’s top risk category is Finance & Corporate, accounting for 22%, of the total 32 risks identified. In the recent Q2 report, the company changed one key risk factor under the Production risk category.

Qorvo highlighted its reliance on third parties and associated risks. It purchases component parts, substrates, and silicon-based products from third-party suppliers and relies on them.

This reliance exposes Qorvo to factors such as probable material disruptions, lack of control over delivery schedules, capacity constraints, and cost increases. Moreover, the present COVID-19 scenario heightens the risk of suppliers falling short on their deliverables.

Any difficulty in procuring materials or services may limit Qorvo’s ability to meet its customer demand. Although Qorvo has entered a long-term supply agreement with an additional supplier in the recent quarter, the risk of supply chain bottlenecks persist. Additionally, quality or reliability issues in the supply chain could negatively impact Qorvo’s products, reputation, and results of operations.

Compared to the sector average of 13%, the company’s Production risk factor is at 16%.

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