Here's Why You Should Offload Qorvo Stock From Your Portfolio
Zacks Investment Research | Jun 18, 2018 10:21PM ET
In case you are still holding on to shares of Qorvo, Inc. (NASDAQ:QRVO) in your portfolio, it’s high time to get rid of the stock. The odds in favor of an upside in the near term are slim. The company has been witnessing downward revisions and has weak fundamentals. Customer concentration from Apple (NASDAQ:AAPL) is another major concern.
Downward Estimate Revisions
Analysts have become increasingly bearish on the stock in the past couple of months with all estimates moving south and no movement in the opposite direction for the ongoing quarter.
Moreover, the company’s first quarter of fiscal 2019 earnings estimates moved down from 80 cents to 76 cents in the past 30 days. Further, in the same time period, the company’s fiscal 2019 earnings estimates moved down from $5.97 to $5.92.
Low Return
Given the other unattractive attributes like low return on equity (ROE), low return on capital (ROC) and low return on assets (ROA), makes the stock look very unappealing. Qorvo currently trades at a ROE of 13.8%, much lower than the industry’s average of 22.8%. Notably, the company has an ROC and ROA of 10.3% and 10.4% compared with the industry’s average of 20.8% and 18.5%, respectively.
Valuation
We note that the Qorvo currently has a trailing 12-month P/E ratio of 18.53. This level compares unfavorably with what the industry has witnessed over the last year. The ratio is higher than the average level of 17.86 and is toward its higher end of the valuation range over this period. Consequently, valuation looks slightly stretched from a P/E perspective.
Dependence on iPhone Sales
Qorvo depends on a handful of customers including Apple and Huawei to keep its revenues churning. To add to the woes, Apple’s self reliance strategy is a looming threat. Moreover, the company operates in a competitive landscape that is becoming more complex with low barriers to entry. The increased competition is exerting pricing pressure, which remains a matter of concern for the company.
Qorvo’s top-line growth is significantly dependent on iPhone’s growth trajectory. We also note that Qorvo’s share price movement depends heavily on Apple’s results, which doesn’t bode well for the investors.
Near-Term Apprehensions Likely to Continue
In order to sustain its market position, Qorvo has to constantly come up with new products. Consequently, higher spending on product development is likely to keep margins under pressure at least in the near term. Hence, we recommend investors to be wary of Qorvo shares until its Zacks Rank and estimates improve.
Zacks Rank & Stocks to Consider
Qorvo carries a Zacks Rank #5 (Strong Sell).
Get The News You Want
Some better-ranked stocks in the broader technology sector are Western Digital (NASDAQ:WDC) and Mellanox (NASDAQ:MLNX) , both sporting a Zacks Rank #1 (Strong Buy). You can see Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.