Cowen Says Qorvo Trends Have Worsened Over the Last 3 Months

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Cowen analyst Matthew Ramsay downgraded shares of Qorvo (NASDAQ:QRVO) to Market Perform from Outperform on Monday, lowering the firm’s price target for the shares from $150 to $108.

The analyst said in a note to clients that “low/mid-tier Android weakness likely weighs further on revenue, margins and sentiment,” pushing its medium-term estimates “well below” consensus.

“Into last quarter’s results, we warned Qorvo’s guidance was at risk due to industry softness, particularly in low/mid-tier China Android smartphones, and geopolitical disruption. Recent checks reveal these trends worsened over the last three months as evident in our broader team’s smartphone market update today, which now calls for -6.0%/-2.0% C2022/23 units decline,” wrote Ramsay. “The cuts represent a downward unit revision of -7%/-11% (-100M/-158M units) due to widespread demand softening, particularly in areas where Qorvo is more heavily exposed than its RF peers.”

As a result, Cowen feels Qorvo is more vulnerable compared to peers in reaction to the cuts, with the analyst outlining three reasons: “(1) greater relative exposure to low/mid-tier OVX-based MediaTek and mid-tier Samsung SKUs, (2) greater competitor RF share gains, notably at Qualcomm as it increasingly attaches its RFFE to Android Snapdragon wins; and (3) lower non-mobile revenue diversification to soften these headwinds with IDP still hovering at ~30% of revenue.”

Answering the question of why they decided to downgrade now, with Qorvo 50% off recent highs, Ramsay told investors that they see “acute risk to consensus estimates for the SepQ and F2024 following our downwardly revised smartphone unit forecasts.”

Qorvo shares have dipped more than 2% in early Monday trading.