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What Does Qorvo’s CEO Think about Apple’s Growth?

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May. 12 2016, Updated 2:07 p.m. ET

Qorvo’s earnings raise hopes for Apple

In the previous part of this series, we saw that RF (radio frequency) supplier Qorvo (QRVO) reported better-than-expected fiscal 4Q16 earnings, despite the fact that one of its top three customers reported declining sales. This customer is none other than Apple (AAPL).

More than the earnings figures, a statement in the company’s fiscal 4Q16 earnings call garnered analysts’ attention. The Street’s founder, Jim Cramer, highlighted the response to a question by Qorvo’s CEO, Bob Bruggeworth, on the trends of its two largest customers.

Bruggeworth noted, “They’ve got some pretty good selling products that we’ve got nice dollar content in, so down to flat for our largest – second largest depending on which one of those you pick.”

Cramer noted that Apple has no top-selling products for the June 2016 quarter, with the exception of its iPhone SE, which reported strong sales in China. A cheaper variant of the iPhone 6, the iPhone SE is attracting price-sensitive customers, according to Drexel Hamilton senior analyst Cody Acree.

Based on Bruggeworth’s statement of “good selling products” and the iPhone SE’s success in China, Cramer raised expectations that iPhone SE could surprise investors and boost Apple’s sales.

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Qorvo earnings come as a surprise

Qorvo’s (QRVO) fiscal 4Q16 earnings came as a surprise as its fellow Apple suppliers Skyworks and Cirrus Logic (CRUS) reported weaker earnings. This turn of events made some analysts pessimistic about Qorvo’s earnings.

The company reported stronger guidance for fiscal 1Q17, beating analysts’ estimates. Such optimistic results pushed Qorvo’s stock up 4.8% a day after the earnings release.

Qorvo beats analysts’ expectations

In fiscal 4Q16, Qorvo’s revenue fell 4% YoY (year-over-year) to $607.1 million, beating the analysts’ estimate of $599 million and its own revenue guidance of $600 million. The company earns ~33% of its revenue from Apple (AAPL) and 10% each from Samsung (SSNLF) and China’s (FXI) Huawei.

Apple reported an 18% YoY decline in iPhone revenue in fiscal 2Q16, and it expects its revenue to fall further in fiscal 3Q16. Samsung’s mobile revenue rose by 8% YoY in fiscal 1Q16, driven by sales of its flagship product Galaxy S7. Huawei reported 73% YoY growth in revenue from its Consumer segment.

The above figures indicate that the declining orders from Apple were offset by increasing orders from Samsung and Huawei.

In the next part of this series, we will look at other factors that drove Qorvo’s revenue in fiscal 4Q16.

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