What the bad jobs report means for markets
On Thursday, Mizuho (NYSE:MFG) Securities maintained a neutral stance on Qorvo Inc (NASDAQ:QRVO) but increased the company's price target to $90 from $80. The adjustment comes as Starboard Value LP, an activist investor, disclosed an investment in Qorvo with the goal of restructuring the company, improving execution, and unlocking shareholder value. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 1.9, while management has been actively buying back shares to boost investor confidence.
Starboard's investment in Qorvo was announced with the intent to address the company's underperformance compared to peers. Over the past decade, Qorvo's shares have risen by approximately 4%, a stark contrast to Skyworks Solutions Inc (NASDAQ:SWKS)'s 16% and Qualcomm Inc (NASDAQ:QCOM)'s 24% increase. Recent market data from InvestingPro shows significant momentum, with an 18.34% return over the past week, though the stock remains down 30.41% over six months. Subscribers can access 10+ additional ProTips and comprehensive valuation metrics for deeper analysis. The activist investor's strategy is likely to focus on several key areas, including reducing research and development (R&D) and selling, general, and administrative (SG&A) expenses to lower operating expenses and improving gross margins by optimizing the fabrication base and increasing foundry outsourcing. Additionally, there is potential for the spin-off of the High Performance Analog (HPA) and Compound Semiconductor Group (CSG) segments or a handset combination to unlock value, as well as enhancing management accountability.
Despite these potential strategic moves, Qorvo faces challenges in the Chinese market. The domestic China RF challenge is significant, with local OEM consumption driven by a RMB500,000 subsidy that benefits specific smartphone models, presenting a headwind to premium RF handsets, including the anticipated iPhone 16, priced above RMB6,000. This market dynamic could pose a challenge for RF suppliers like Qorvo.
Qorvo is expected to report its earnings on January 28, 2025. The company's stock performance and strategic developments will be closely watched by investors and analysts, particularly in light of the recent involvement of Starboard and the outlined focus areas for improvement. With the revised price target, Mizuho signals a modest optimism for the company's potential to address its challenges and improve its market position. Despite not being profitable over the last twelve months, InvestingPro analysis indicates that net income is expected to grow this year, with analysts projecting a return to profitability.
In other recent news, Qorvo Inc. has seen a change in its stock target from Mizuho Securities, reducing it to $80.00 from the previous $98.00, while maintaining a neutral stance. This adjustment was made despite Qorvo's robust Q2 2025 results, which saw revenues hitting $1,047 million, an 18% increase from the previous quarter, and non-GAAP diluted earnings per share (EPS) of $1.88 surpassing expectations. However, Qorvo anticipates a slight decline in revenue for fiscal 2025 due to shifts in the Android smartphone market.
In a strategic move, Qorvo divested its silicon carbide business to reallocate resources to strategic growth areas and reduce operating expenses. This decision aligns with the company's objective to focus on areas with a higher growth potential and profitability. Financial services firm Loop Capital has initiated coverage on Qorvo, assigning a Hold rating and a price target of $73.00, indicating a complex environment for the company.
Loop Capital's hold rating and price target reflect a cautious outlook for Qorvo, acknowledging both the immediate market challenges and the possible future opportunities for the company. Despite these challenges, Qorvo has secured automotive design wins and is expanding its Wi-Fi 6 and 7 offerings, focusing on high-value product placements and targeting double-digit growth in defense and High Performance Analog technologies. These are among the recent developments for Qorvo.
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