Brean Capital analyst Mike Burton weighs in on shares of semiconductor company Qorvo Inc (NASDAQ:QRVO) following the company’s first quarter results for the fiscal year of 2017. On the back of sustained revenue and earnings momentum, the analyst reiterates his Buy rating, suggesting a $62.00 price target.
The company reported revenues of $698.5 million, beating consensus estimates of $650 million. Burton attributes these revenue upsides to strength in sales in the Chinese market as well as gains in Apple content from the iPhone 6SE. Quorvo’s handsets served as a driving factor in mobile product revenue surges along with the bolstered support of wifi products. Operating expenses were up as a result of investment raises in high performance filters leading to earnings per share of $1.08, just over the Street’s projection of $1.05.
In addition to the earnings beat, Burton believes that revenue momentum will continue into the next quarter due to strong mobile revenues. The analyst explains that the company saw order activity accelerate throughout this quarter and into July. The company’s gross margins fell below expectations, however, due to yield issues and product costs. The company reported gross margins of 48.2%, below guidance. In addition to the earnings beat, Burton believes that revenue momentum will continue into the next quarter due to strong mobile revenues. The analyst explains that the company saw order activity accelerate throughout the quarter and into July.
However, Burton notes a drawback when it comes to gross margins falling below expectations by 48.2%, due to yield issues and seeing an increase in product costs following mixed low band pad business. From Burton’s perspective, “Generally speaking it is our view that this triggers fear to any semiconductor investor no matter which company it is or the size of the forward EPS raise. Despite the near-term leverage challenges, we remain positive on shares of QRVO as the company does see a path back to 50% gross margins as the business moves to a better mix of BAW filers and they execute on other initiatives that the company outlined such as wafer conversion and better yields, which will result in cost cuts.”
According to TipRanks, 53% of analysts issue a Buy rating for QRVO, 40% maintain a Hold rating, and 7% issue a Sell rating on the stock. The consensus target price for QRVO is $60.64, marking a 1.32% downside from current levels.
Mike Burton is ranked #102 of 4,085 analysts on TipRanks. He is considered a five-star analyst, maintaining a success rate of 64% and realizing an average return of 13.6%. However, when rating QRVO, the analyst sees an average loss of 12.7%.
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