Just as Qorvo (QRVO +9%) and Avago (AVGO +5.1%) rallied in response to Skyworks' (SWKS +2.1%) beat-and-raise FQ2 report last week, Skyworks and Avago are rallying today after Qorvo beat FQ4 estimates with the help of strong iPhone 6-related sales, and offered above-consensus FQ1 guidance.
Needham's Quinn Bolton has upgraded Qorvo to Buy, and set an $88 target. Bolton: "Management expects continued robust revenue growth in C2H15 as it has high visibility into the major Tier 1 OEM platform launches later this year. Additionally, QRVO expects continued 4G adoption in the emerging markets to drive strong growth in F1Q16 and C2H15, echoing recent peer commentary."
He also notes Qorvo now expects to exceed prior RF Micro/TriQuint merger synergy targets, and that its 2H15 gross margin and op. margin could respectively top targets of 50% and 30%. "We believe QRVO's valuation multiple has yet to reflect the greater than expected synergies, revenue growth and operating leverage."
Qorvo is now aiming for more than $150M/year in synergies by the end of 2016. Major FQ4 design wins included a diversity switch module for a flagship Android phone set to launch in 2H15, and power amplifier wins for major base station and an 802.11ac Wi-Fi chipset. The company asserts the merger is helping it develop integrated RF front-end solutions combining amplifiers, filters, and diversity modules.
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