Qorvo stock drops nearly 10% as analysts expect inventory correction to continue


Qorvo Inc. shares fell Thursday while the broader market rallied after analysts said inventory digestion will likely hamper the radiofrequency chip maker until the second half of the year.


shares fell nearly 10% Thursday to an intraday low of $102.60, a drop of 6%. The S&P 500 index
meanwhile, was up more than 1%, and the tech-heavy Nasdaq Composite Index

was up nearly 3%.

Late Wednesday, Qorvo’s forecast an outlook for the March-ending quarter that fell well below the Wall Street consensus at the time.

Cowen analyst Matthew Ramsay said the company was still working its way through a sharp inventory correction and that the March- and June-ending quarters will “likely be painful, despite already washed out expectations” with Apple Inc.

iPhone seasonality and a glut of components for phones using Alphabet Inc.’s


Android operating system.

Ramsay, who has a market perform and a $100 price target, said that gross margins were being hit “by lower utilization as Android ecosystem continues to chew through inventory, with commensurate impact on EPS,” and called for “more of the same” before a potential snap-back by the end of September.

Citi Resesrch analyst Atif Malik, who has a neutral rating and a $133 price target, said that decelerating 5G adoption and increased RF competition kept him on the sidelines.

“Despite China sales picking up in the first three weeks of Jan on reopening, customers remain cautious for the full year,” Malik said.

Morgan Stanley analyst Joseph Moore, who has an equal-weight rating and a $110 price target, said that while Qorvo’s inventory correction has dragged out for five to six quarters, “visibility remains low.”

“This time last year we had argued that inventory could burn off by 2h22, and in early 2023 we find ourselves in the same position talking about a recovery in 2h23,” Moore said. “The company reduced channel inventory for Android by more than 20% in the December quarter, which would imply there is still quite a bit of
work to do.”

Read: The world is buying fewer devices, and inventories for PCs, phones and tablets are building

Unlike many chip companies, Moore said he believed Qorvo was under-shipping end demand, and that investors have been “understandably” forgiving of weak China sales given last year’s COVID shutdowns.

Recently, Gartner forecast that mobile phone shipments worldwide would fall 4% to 1.34 billion units in 2023, following an 11% drop in 2022.

“All of that leaves us constructive despite the severe contraction in earnings expectations, but restoring full earnings power is going to take time,” Moore said.

Many chip makers are dealing with their own inventory clearance challenges like Intel Corp.

and Advanced Micro Devices Inc.

after a two-year chip shortage caused by the COVID pandemic flipped to a glut in 2022.

Of the 27 analysts who cover Qorvo, seven have buy-grade ratings, 18 have hold ratings, and two have sell ratings, along with an average target price of $135.38, according to FactSet data.


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