Morningstar | QRVO Updated Forecasts and Estimates from 02 Nov 2018
Qorvo reported fiscal first-quarter results that exceeded our expectations and the company's previous guidance. The company's forecast for the December quarter was squarely in line with our expectations, as strength at Apple will appear to be partially offset by soft demand for smartphones built by Chinese manufacturers. Longer term, we're encouraged by the firm's disclosed 5G radio frequency (RF) chip design wins with Samsung and a leading Chinese-based smartphone vendor and continue to believe the firm is well positioned in 5G in both handsets and wireless infrastructure. We will maintain our $90 fair value estimate for no-moat Qorvo and see a decent margin of safety for investors today.Revenue in the September quarter was $884 million, up 28% sequentially, up 8% year over year, and solidly ahead of the firm's prior guidance of $850 million-$860 million as discussed in July. Mobile product revenue was $667 million, up 37% sequentially (ahead of the firm's prior guidance of 30%-plus growth) and up about 6% year over year, thanks to content gains within Apple's latest slate of iPhones. Infrastructure and defense product revenue was $218 million, up 15% year over year with nice strength in base station applications. With 5G network spending on the horizon in developed markets, Qorvo appears well positioned to see strong IDP growth in the years ahead. Sales of gallium nitride-based semis rose 27% year over year, which again bodes well for the company's 5G portfolio. Higher sales levels enabled adjusted gross margins to rise 370 basis points sequentially to 47.7%, also ahead of guidance.
For the December quarter, Qorvo expects revenue in the range of $880 million-$900 million, which, at the midpoint, represents flattish sales sequentially (albeit off of strong September quarter results). Qorvo was cautious about RF chip demand from Chinese smartphone makers, but ultimately, we still see Qorvo maintaining its incumbency as a leading 4G RF vendor into the region.
Looking ahead to 5G, Qorvo noted several design wins in smartphones slated to launch in the second half of calendar 2019. The firm's GaN-based semis also appear to be doing well in the base station market. Management remains confident that Qorvo will realize content gains in 5G, as the wireless technology will require massive MIMO with more antennas (and related antenna tuning and switching RF content) in both base stations and handsets.
For further insight into the 5G RF landscape, please refer to our October 2018 special report "Filtering the 5G Radio Frequency Landscape."
Qorvo is a holding company. Through its subsidiaries, the company designs, develops, manufactures and markets its products to U.S. and international original equipment manufacturers and original design manufacturers in two operating segments: Mobile Products, which is a supplier of cellular radio frequency (RF) and Wi-Fi solutions for mobile devices, including smartphones, wearables, laptops, tablets and cellular-based applications for the Internet of Things (IoT); and Infrastructure and Defense Products, which is a supplier of RF and system-on-a-chip solutions for cellular base stations and other wireless communications infrastructure, defense, smart home, automotive and other IoT applications.
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