The adoption of 5G wireless technology is imminent. 5G is dramatically faster than 4G networks and will have the ability to significantly reduce latency.
In addition, 5G technology has the ability to enable new applications such as augmented reality and cloud-based gaming.
Strategy analytics forecast that around 624 million 5G smartphones could be shipped this year which is a huge jump from last year’s shipment of 269 million.
The trend is clear. So what are the best 5G stocks to buy now?
Some of the top 5G stocks include T-Mobile, Verizon, and AT&T. In addition, another 5G stock that investors should be keeping a close eye on right now is Qorvo, a company that commercializes products for wireless and wired connectivity globally.
Headquartered in Greensboro, North Carolina, Qorvo is an American semiconductor company that designs, manufactures, and supplies radio-frequency systems for applications that drive wireless and broadband communications. Radio frequency is the band of frequencies between roughly 20 kHz to 300 GHz.
Since the company’s founding in 2015, Qorvo has deployed 5G infrastructure and 5G mobile products. 5G technology mainly uses two parts of the radio spectrum. One is EHF (extremely high frequency) between 30 GHz and 300 GHz, also known as the millimeter band. The other is UHF (ultra-high frequency) between 300 MHz to 3 GHz.
In January 2015, QRVO was trading at an IPO price of $65 per share. The stock hit an all-time high in April 2021, trading for just over $200 per share. Just a year later, QRVO stock is down by nearly half.
The company’s market cap is around $12.6 billion and over the past year it has been in a wide range: the stock’s 52-week low is $111.74, and its 52-week high is $201.68.
Management Are Highly Optimistic
It’s clear that Qorvo stock has been on a downtrend over the last year. It has especially taken a beating over the past three months due to supply chain problems with Apple and the broader sell-off that hit the tech sector.
Despite the recent downtrend, company executives remain optimistic about the company’s future. During the Qorvo Inc Q4 2021 Earnings Call, Robert Bruggeworth, the Chief Executive Officer, relayed messages to shareholders about what is on the horizon for Qorvo.
Bruggeworth highlighted some positives, saying, “Qorvo concluded our fiscal 2021 with an exceptionally strong March quarter. Quarterly revenue, gross margin, and EPS were well above guidance. Outperformance was driven primarily by 5G smartphones and WiFi 6 and 6E. Demand was broad-based across customers, and design activity suggests continued strength in fiscal 2022, supported by multiyear trends in wired and wireless connectivity markets.”
He went on to discuss the important growth that will come with the adoption of 5G, saying, “In smartphones, the adoption of 5G is driving demand for higher-value content. For calendar 2021, we expect 5G smartphones to double versus last year. Within these phones, we expect the RF content to increase $5 to $7 per phone when compared to 4G, including in the mid-tier.”
In addition to Bruggeworth’s comments, Mark Murphy, the Chief Financial Officer outlined the financial situation of Qorvo. Murphy relayed to shareholders, “Qorvo’s revenue for the fiscal 2021 fourth quarter was $1.73 billion, $33 million above the midpoint of our guidance and up 36% or $285 million versus last year. Mobile Products revenue of $808 million was up 45% year-over-year on the growth of higher content 5G smartphones. Infrastructure and Defense Products revenue of $265 million was up 14% versus last year, led principally by robust WiFi demand.”
The Chief Financial Officer went on to say,” In the fourth quarter of fiscal 2021, we delivered our third consecutive quarter of gross margin over 50%. Non-GAAP gross margin was 52.6% and above our guidance as less favorable mix was more than offset by better-than-expected price, manufacturing costs, and inventory charges. Non-GAAP operating expenses in the fourth quarter were $207 million or 19.3% of sales and in line with expectations. Sequential and year-over-year increases in OpEx were driven by technology and product development expenses associated with recent acquisitions and other key growth programs.”
Murphy finished up his message to shareholders by saying, “Entering fiscal 2022, we are well-positioned to continue delivering premium technology to an expanding set of customers in 5G, WiFi, IoT, defense, power management, and other markets.” Based on these comments and analytics, the outlook for Qorvo is positive despite falling stock prices, so is now the time for investors to start adding Qorvo to their investment portfolios?
Is Qorvo a Buy, Sell, or Hold?
When we ran a discounted cash flow forecast analysis on Qorvo, we arrived at a fair market value that was 60% higher than the current share price at the time of research. Our best analysis suggests that the intrinsic price per share for Qorvo is $183.60 per share.
Clearly from a valuation perspective, Qorvo is a screaming buy. Cash flow, growth, profit and relative value are all attractive. In fact, the only real area of weakness for Qorvo is price momentum, which for longer term investors is not much of a deterrent. In fact, the company is arguably more attractive as the share price gets weaker while the fundamentals remain strong.
With revenues up 24% year over year and anticipated to eclipse $6 billion by FY 2026, this 5G player has the potential to turn a profit for current shareholders who are willing to buy the fear.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.