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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 digitally connected than ever before through mobile devices powered by Qorvo's innovative chip technology.

The commencing 4th Industrial Revolution is connecting everything & everyone around us. The pandemic's accelerated digitalizing impact has kick-started a paradigm shift in the economy that positions the semiconductor market to explode through the roaring 20s. Society's growing penchant for advanced technology has made Qorvo and its best-in-class connectivity chips more valuable than ever before.

QRVO is trading about 50% above its pre-pandemic levels but has consolidated since 2021 began, with a valuation compressing sideway ways trade for nearly 3 quarters (earnings growing while its share price remains constant). After bouncing off a key support level in oversold territory amid last Monday's sell-off (9/20), the stock looks primed to breakout.

QRVO is now trading at its lowest forward P/E multiple since the Great Capitulation last March. There appears to be a renewed bid for semiconductor stocks following a 9-month lull as investors look towards the future of this technological backbone, and it's about time we all increase our exposure to this underappreciated space.

Analysts have raised their EPS estimates on QRVO, propelling it into a Zacks Rank #1 (Strong Buy).

The Business

Qorvo has a diverse portfolio of chips that fall into two categories: Mobile Products (MP) and Infrastructure & Defense Products (IDP). Its MP segments include chips for smartphones, wearables, laptops, tablets, and internet of things (IoT) devices. MP is the company's primary growth driver, with Apple's illustrious iPhone and the 5G 'super-cycle' being the crown jewel.

IDP enables technologies such as wireless infrastructure, defense, Wi-Fi, smart homes, advanced automobiles, and IoT. This division is a much more volatile revenue driver as it is typically project-based. Nevertheless, with the $3.5 trillion US infrastructure bill in the works and a supplementary chip-focus spending proposal, I suspect this segment will get another boost in the coming quarters.

Qorvo is a radio frequency (RF) technology leader: the driving force behind the 5G revolution, catalyzing the demand for the newest mobile devices along with the nascent IoT space. This next generation of mobile connectivity is anticipated to connect everything around us. Smart cities are on the horizon, and Qorvo's next-generation 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.

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.

Qorvo's cutting-edge RF chips are being utilized in Apple's (AAPL - Free Report) first 5G iPhone (the iPhone 12), and demand is expected to be enormous. Over 100 million iPhone 12 had been sold as of Q2 in this record 5G-fueled iPhone super-cycle. The iPhone 13 has just been unveiled, which should propel another wave of demand for this now ubiquitous smartphone. Qorvo ultra-wideband chip technology is at the core of these new devices, providing them with best-in-class functionality.

QRVO Technical Levels

QRVO is trading 13.5% off its all-time highs, which it reached last month, and just bounced off a critical support level at around $168 a share in oversold RSI territory, which you can see circled in red below.

Image Source: TradingView

After testing and rebounding off that support last Monday (9/20), these shares look prepped to break out at their currently underappreciated level. Still, we will likely face some resistance at its 200-day moving average (around $180), which this equity recently dipped below for the first time since April 2020.

The best time to start a position in a high potential stock is when it's down, and right now, QRVO is decidedly down.

Final Thoughts

With the recent spike in market volatility and FUD (fear, uncertainty, & doubt) growing daily in this pivotal late-cycle market period, many are apprehensive about buying anything. 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 chip powerhouse will play a critical role in the budding 5G Revolution. 13 out of 17 analysts are calling these shares a buy today with no sell ratings. QRVO currently sits 23% below its average price target of $214 a share and 44% below its more bullish target of $250. QRVO is a stock to hold for your portfolio of the future.

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