QRVO - Valens Credit Report - 2024 01 24
Credit markets are slightly overstating credit risk with a YTW of 5.812% relative to an Intrinsic YTW of 5.082% and an Intrinsic CDS of 106bps. Furthermore, Moody's is overstating QRVO's fundamental credit risk with its Ba1 credit rating three notches below Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. That said, most management members are material owners of QRVO equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company. Additionally, management members have low change-in-control compensation relative to their annual average compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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