What Happened:
Shares of communications chips maker Qorvo (NASDAQ: QRVO) fell 7.3% in the morning session as stocks of semiconductor companies that design chips used in smartphones fell after Wall Street analysts raised concerns about the shipping time of iPhone 16 Pro models relative to the previous year.
Adding to the signs of weak demand, TF Securities analyst Ming-Chi Kuo added that "demand for the new iPhone 16 is lower than expected -- and down 12% year over year from the first-weekend sales of the iPhone 15 last year." Concerns raised by the analyst include intense competition in the Chinese market and the unavailability of Apple Intelligence (a major selling point) during the iPhone 16 release.
Apple shares fell by more than 3% following the reports, hinting at potential vulnerabilities in the coming quarters. Notably, weak demand for the iPhone 16 could translate to lower production volumes, which could, in turn, inform the decision to reduce demand for components like chips, potentially causing a slowdown for semiconductor companies supplying these inputs.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Qorvo? Access our full analysis report here, it’s free.
What is the market telling us:
Qorvo’s shares are quite volatile and over the last year have had 6 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 15.2% on the news that the company reported first-quarter results and provided revenue guidance for the next quarter, which missed analysts' expectations. In addition, its inventory levels increased.
On the other hand, Qorvo posted a strong improvement in gross margin. Its EPS outperformed Wall Street's estimates. While the sales outlook was underwhelming, it is worth acknowledging the return to positive growth recorded during the quarter, attributed to strength in the High-performance analog segment. The Connectivity & Sensors also contributed to the rebound. Overall, this was a mixed but weaker quarter.
Qorvo is down 8.1% since the beginning of the year, and at $100 per share it is trading 22.6% below its 52-week high of $129.21 from July 2024. Investors who bought $1,000 worth of Qorvo’s shares 5 years ago would now be looking at an investment worth $1,295.
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