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Bull Of The Day: Qorvo (QRVO)

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Qorvo (QRVO - Free Report) is a chip powerhouse striving to digitally connect the world. The global pandemic has forced society online, and today we are more connected than ever before through the world wide web. The impending 5G revolution, combined with the pandemic's digitally inclined tailwind, has made Qorvo more valuable than ever before. Analysts have been raising their EPS estimates on this stock and pushed QRVO into a Zacks Rank #1 (Strong Buy).

The Business

Qorvo is a radio frequency (RF) technology leader: the driving force behind the internet of things (IoT) and the 5G revolution. This next generation of mobile connectivity is anticipated to connect everything around us. Smart cities are on the horizon, and Qorvo's next-generation RF chips are going to be integral in its build-out.

The RF solutions market is expected to explode over the next 5 years as the 5G technology rolls out. The RF market is estimated to expand at a compounded annual growth rate (CAGR) of 14%, reaching $45 billion by 2025, according to Grand View Research.

Qorvo’s cutting-edge RF chips are being utilized in the first 5G iPhone (the iPhone 12), and demand is expected to be enormous. Analysts project that this "landmark" smartphone will sell 50 million units in the final months of 2020, with this figure expected to multiply in 2021.

We are only at the dawn of the 5G revolution. This technology is just beginning to take hold of the mobile world, and its implications are beginning to ripple across all sectors. Qorvo is well-positioned to heavily profit from this exciting industry’s rapid growth.

Upcoming Earnings

Qorvo is releasing its September quarter results on Wednesday, November 4th, and analysts predict it will be showing-off its best quarter as a public company.

Management was very optimistic in its last earnings report 3 months ago, increasing its mid-point revenue guidance for its September quarterly report from $940 million to $1.015 billion and a 13% EPS increase to $2.14. It would make it a record quarter if it can deliver, and I do not doubt that it will with the company illustrating 9 consecutive quarters of top and bottom-line beats.  

QRVO Technical Levels

QRVO is trading 9.5% off its all-time highs, which it hit less than a month ago with the rest of the semiconductor sector. The recent pre-election jitters and the uptick in COVID cases have brought the whole market down a notch in the past few weeks, and QRVO was no exception to this trend.

QRVO just dipped below its 50-day moving average (blue line) around $130 a share, and it looks like this old support level has become a resistance, but it is something that I have no doubt QRVO will be able to break through once the market turbulence subsides. Look for its 200-day moving average (orange line) to provide support around $110 if the stock were to experience a deeper decline, at which point I wouldn't hesitate to buy (under the assumption that nothing systemic about the enterprise has changed).

Right now, QRVO is teetering in oversold territory. The stochastic oscillator on the bottom of the chart illustrates the relatively oversold level that this stock closed at on Friday. QRVO's stochastic dip indicates that this could be an opportunity to jump into these shares before they jump back up to new highs.

Final Thoughts

With the recent spike in market volatility and one of the most controversial US elections only a day away, uncertainty couldn't be higher in the stock market. But remember the old Warren Buffett proverb, "be greedy when others are fearful."

I can't promise that QRVO doesn't have choppy waters ahead (at least in the short run). However, I am confident that this RF chip powerhouse will play a critical role in the budding 5G Revolution. 15 out of 18 analysts are calling these shares a buy today with no sell ratings. QRVO is a stock for your portfolio of the future.

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