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.
Continue here:
Qorvo Still Not Getting Its Due
