Qorvo Vulnerable To Inventory Overhang, Analysts Say Post Q4

Needham analyst Rajvindra Gill maintained Qorvo Inc QRVO with a Buy and raised the price target from $105 to $130.

Qorvo's fourth consecutive guide down set expectations significantly lower. 

Elevated channel inventory is hurting utilization; gross margin deterioration is now well below Gill's previous estimate, and weakness persists through F1H24. 

Management did point out that China's handset sell-through has been strong YTD, the first signs of recovery in the analyst's view. 

Gill's FY24 estimates decreased significantly but became more confident of a trough. Underutilization and inventory dynamics will have flowed through the model just as content gains at the top customers ramp. 

The analyst views QRVO as a major beneficiary of the expected upgrade cycle at Apple Inc AAPL and Samsung Electronics Co, Ltd SSNLF with 5G phones. 

Wells Fargo analyst Gary Mobley maintained an Equal-Weight and raised the price target from $90 to $110.

The re-rating reflects better-than-exp 3Q22 results & 4Q22 guide indicative of inventory burn. The price target reflects an adjustment for a higher comp group valuation and a higher est recovery scenario. 

Mizuho analyst Vijay Rakesh maintained a Neutral and raised the price target from $93 to $100.

QRVO noted March quarter challenges with RF inventory overhang, overall 2023 handset down Y/Y, despite 5G growth, some content and share gains in next-gen flagship models, and underutilization charges impacting GM by ~920bps.

BMO Capital analyst Ambrish Srivastava maintained a Market Perform and raised the price target from $90 to $105. The channel seems to be awash with excess Qorvo inventory. 

At some point, it will likely normalize, especially in China, where sales are well off the peak. 

While handset inventory is likely normalized, component inventory is not. Qorvo indicated that its component inventory will take at least until this CY to normalize (a quarter sooner in handsets). 

Susquehanna analyst Christopher Rolland maintained a Neutral and raised the price target from $95 to $100. Inventory dynamics continue to weigh on Qorvo, but content gains at Apple and Samsung should help. 

Price Action: QRVO shares traded lower by 4.71% at $108.26 on the last check Thursday.