The 5G smartphone market is about to inflate in 2021. appeal supplier Murata estimates that sales of 5G smartphones could exceed 500 million units in the new year compared to 300 million units in 2020. Market research firm Strategy Analytics has a more aggressive forecast – it predicts a 150% increase in 5G smartphone sales from 2020 estimated shipments of 250 million units.
Qorvo (NASDAQ: QRVO) offers one way for investors to take advantage of this huge increase in 5G smartphone sales. The chipmaker supplies radio frequency chips to several major OEMs of smartphones (original equipment manufacturers). Not surprisingly, Qorvo’s revenue and earnings have accelerated very rapidly in recent times – a trend that is likely to continue when the disc maker announces its fiscal results in the third quarter of 2021 on February 3rd. Here’s what you can expect.
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Qorvo is about to make big profits again
Analysts expect Qorvo to deliver non-GAAP earnings of $ 2.66 per share on revenue of $ 1.06 billion for the December quarter. These estimates are consistent with management’s guidance and are a good year-over-year $ 1.86 in earnings per share and $ 869 million in revenue.
But do not be surprised to see the company shoot beyond its own expectations. This is because Apple, which is believed to account for a third of Qorvo’s sales, may have scaled down its iPhone production in the last calendar quarter of 2020. The supply chain checks conducted by Daniel Ives, analyst at Wedbush Securities, suggested that Apple put nearly 90 million iPhones in in the fourth quarter, compared to its original estimate of 65 million to 70 million units as of September 2020.
Such an impressive jump in iPhone production through the quarter does not seem surprising, as the demand for the iPhone 12 is very strong. After all, it did not take long to sell the 5G smartphone worldwide, so Apple alone can give Qorvo a good chance to help it outperform Wall Street’s estimates as the company announces its results this week.
The party is just getting started
Analysts believe Qorvo will be able to maintain its high growth rate, with the top line growing 19% year-on-year in the fiscal quarter, while earnings rose 27% to $ 2.00 per share.
However, there is a high possibility that Qorvo will exceed these estimates. Cowen analysts estimate that Apple could increase its iPhone builds to 55 million units in March, up 49% from a year earlier. Wedbush has an even more aggressive forecast, with the estimate that iPhone would build between 60 and 70 million units in the current quarter. In addition, the momentum is expected to spread in the second quarter of the calendar year, and Apple is expected to make at least 40 million iPhone units.
All of this is good for Qorvo, given its close relationship with the technology giant. However, the chipmaker relies on additional growth operators such as Samsungrecently launched the Galaxy S21 flagship. Qorvo has been a long-time supplier of RF chips to Samsung’s Galaxy range of smartphones, including Galaxy S20 devices last year, and is likely to retain its place in the new version.
This is because Samsung’s Galaxy S21 Ultra is equipped with WiFi 6E connectivity, and Qorvo indicated on its latest earnings call that it “actively supports leading OEMs in designing 6E platforms.” Counterpoint Research estimates that Galaxy S21 shipments will surpass those of the Galaxy S20 by the middle of this year. This will not be surprising as Samsung has reduced the base prices of the Galaxy S21 models by $ 200 compared to the previous S20 series.
Qorvo can achieve the success of its mobile customers and maintain its impressive growth rate. More importantly, investors should not forget that the 5G smartphone market is still offering a lot of growth, as shipping could reach 1.5 billion units by 2025. In this environment, Qorvo could remain a top-5G game in the long run, and a strong performance in the upcoming earnings report should give investors the right chance to buy the stock.