What Happened?
Shares of communications chips maker Qorvo (NASDAQ: QRVO) fell 27.7% in the afternoon session after the company reported weak third-quarter earnings, with its revenue and EPS guidance for next quarter missing analysts' expectations. The company provided weak full-year revenue and gross margin guidance due to an unfavorable shift in smartphone demand as more consumers opt for lower-priced 5G smartphones rather than mid-range options. Notably, cheaper smartphones tend to fetch lower profit margins compared to mid-tier and flagship models. Even worse, Qorvo doesn't expect the trend to reverse, at least in the near term.
On the other hand, Qorvo recorded a big improvement in inventory levels, and its revenue outperformed Wall Street's estimates. Overall, this was a weaker quarter for the company.
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What The Market Is Telling Us
Qorvo’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Qorvo and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 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 segment also contributed to the rebound. Overall, this was a mixed but weaker quarter.
Qorvo is down 32.6% since the beginning of the year, and at $73.42 per share, it is trading 43.2% 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 $919.47.
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