On Wednesday, Benchmark downgraded Qorvo Inc (NASDAQ:QRVO) shares from Buy to Hold. The firm cited reduced leverage to Apple (NASDAQ:AAPL)'s iPhone 16 family and a general industry trend towards lower-priced smartphone models as reasons for the downgrade. The absence of a price target accompanies this rating change, in line with the company's policy when altering coverage stances.
Qorvo, during its recent earnings call, reported a slight positive outcome for its September quarter but provided weaker-than-anticipated guidance for the December period. The company observed negative trends among its major customers, including issues with unit volumes and product mix.
While not directly naming Apple, which accounts for nearly half of Qorvo's revenue, the firm mentioned challenges with dollar content in Samsung (KS:005930)'s flagship phones, where Qorvo's revenue for the OEM's high-volume autumn models declined compared to the previous year.
The company's reduced dollar content was also evident in the iPhone 16 tear-downs, with Qorvo having less influence over Apple's non-Pro models, which are gaining a larger share than initially projected. This contrasts with Qorvo's June quarter conference call, where the company expressed confidence in growing its market share in Apple's 2024 portfolio.
For fiscal year 2025, Qorvo now expects its revenue from Apple to be roughly flat, or a few percentage points lower than initially expected. This outlook is partly due to the lower dollar content in Apple’s non-Pro models. Moreover, Qorvo noted that weaker consumer demand at leading smartphone customers was impacting its business visibility negatively.
In other recent news, Qorvo Inc. reported better-than-expected fiscal second quarter results, with adjusted earnings per share of $1.88 and revenue of $1.05 billion. However, the company's outlook for the current quarter fell short of expectations, predicting third quarter revenue of approximately $900 million and adjusted earnings per share between $1.10 and $1.30.
BNP Paribas (OTC:BNPQY) Exane, Piper Sandler, Goldman Sachs (NYSE:GS), and Barclays (LON:BARC) have all adjusted their price targets for Qorvo, while Raymond James downgraded the stock from Outperform to Market Perform. These adjustments come in light of changes in the smartphone market and a shift in Qorvo's product mix.
Despite these challenges, Qorvo is implementing measures including factory consolidation and operating expense reductions. The company now expects full-year fiscal 2025 revenue and gross margin to be slightly down compared to fiscal 2024. These are among the recent developments at Qorvo.
InvestingPro Insights
In light of Benchmark's downgrade of Qorvo Inc (NASDAQ:QRVO), it's worth considering some additional financial insights. According to InvestingPro data, Qorvo's market capitalization stands at $9.53 billion, reflecting its significant presence in the semiconductor industry despite recent challenges.
InvestingPro Tips highlight that while Qorvo is not currently profitable over the last twelve months, analysts predict the company will return to profitability this year. This aligns with the company's expectation of flat or slightly lower revenue from Apple in fiscal year 2025, suggesting potential for recovery.
Another relevant InvestingPro Tip notes that management has been aggressively buying back shares. This could indicate confidence in the company's long-term prospects, despite the current headwinds in the smartphone market.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into Qorvo's financial health and future outlook.
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