Qorvo Still Not Getting Its Due

When I last wrote about Qorvo (QRVO) in early January, I thought the shares of this chip company were undervalued, but I thought the near-term outlook was clouded by the possibility of another guidance cut (which happened with fiscal Q3 earnings in February) and a lingering perception of Qorvo as a “problem child” with respect to overreliance on mobile end-markets and problematic gross margins. To that latter point, the shares have continued to consistently lag the SOX since that last article, though they’re up about 20%.

Generating alpha by investing in laggards is a tough way to go, but it is not without its rewards. Once a company’s perception changes, the rerating can be quick and significant. While Qorvo seems to have lost content with Apple (AAPL) (back to Broadcom (AVGO), presumably), I think the IDP segment is under-appreciated, and I likewise think the gains with non-Apple vendors are underappreciated for their margin benefits. It doesn’t take heroic assumptions to get a high $80’s fair value, but this is a stock that has tested investor patience for some time and we may not be out of the woods yet with this sector correction.

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Qorvo Still Not Getting Its Due