For Immediate Release
Chicago, IL – March 29, 2021 – Today, Zacks Equity Research discusses Semis - Radio Frequency including Skyworks Solutions, Inc. (
SWKS Quick Quote SWKS - Free Report) , Qorvo, Inc. ( QRVO Quick Quote QRVO - Free Report) , Resonant Inc. ( RESN Quick Quote RESN - Free Report) , Apple Inc. ( AAPL Quick Quote AAPL - Free Report) , Akoustis Technologies, Inc. ( AKTS Quick Quote AKTS - Free Report) and RF Industries, Ltd. ( RFIL Quick Quote RFIL - Free Report) .
Rapid deployment of 5G networking is driving the proliferation of Internet of Things (IoT), Advanced Driver Assistance Systems (ADAS), Augmented Reality/Virtual Reality (AR/VR) devices.
Further, democratization of 5G smartphones is a tailwind for the companies categorized under Zacks
Semiconductors - Radio Frequency industry. This has bolstered 5G Radio Frequency (RF) content, which favors the prospects of prominent industry players including Skyworks, Qorvo and Resonant.
Thereby, the outlook for the Zacks Semiconductors - Radio Frequency industry appears encouraging at the moment. Nevertheless, lingering impacts of coronavirus pandemic led business volatility remain concerning.
The Zacks Semiconductors - Radio Frequency Industry comprises companies that provide RF solutions, Front-end Modules (FEMs), low-noise amplifiers, diodes, multi-chip modules (MMICs) and optical components.
The industry participants also offer surface acoustic wave (SAW), bulk acoustic wave (BAW) technology-based antenna-plexers, and film bulk acoustic resonator (FBAR) filters to enable smartphone devices to function more efficiently in congested RF spectrum.
The industry players serve a wide array of industries with their solutions finding ample application in 5G and smartphone equipment, aerospace and defense, optical networks, cellular base stations, automotive and smart home applications.
Most of these companies utilize robust wafer fabrication technologies to gain competitive edge over peers. The companies also leverage ZigBee, Bluetooth Low Energy (BLE), Thread, silicon germanium and Gallium Nitride (GaN) technologies across their portfolio in a bid to stay ahead of the curve.
4 Trends Influencing the Prospects of the Semiconductors - RF Industry : Rapid implementation of 5G networking infrastructure and robust adoption of cloud computing applications hold promise considering the wireless communication market. Coronavirus crisis-induced work-from-home wave has necessitated the need for higher bandwidth and triggered LTE advancements, which are expected to bolster demand for RF power amplifiers. Accelerated Deployment of 5G is a Tailwind
Additionally, increasing RF content in latest 5G smartphones is a key catalyst. For instance, the roll out of
Apple's full 5G iPhone 12 line up is anticipated to benefit the top-line performance of both Qorvo and Skyworks at least in the near term. Notably, both the companies derive significant revenues from Apple, which is poised to gain from the incremental adoption of its latest iPhones. : Demand recovery in the smartphone market is likely to aid prospects of major industry players, including Qorvo, Skyworks, Resonant, Rebound in Smartphone Market Favors Growth Prospects Akoustis and RF Industries. Notably, per latest data from IDC, are projected to grow 13.9% year over year in the first quarter of 2021 and 5.5% in 2021, reflecting persistent demand recovery and a supply-side push of 5G devices. Moreover, 5G smartphone shipments are projected to account for more than 40% of global volume in 2021 and to subsequently grow to 69% in 2025.
IDC estimates that growing competition in the 5G Android domain, specifically from China-based smartphone vendors, is anticipated to result in aggressively priced 5G handsets. This is expected to accelerate the democratization of 5G smartphones and boost prospects of the industry players.
: Easing shelter-in-place guidelines, as economies started to reopen, has led to growing clout of contact tracing applications in Ultra-Wideband (UWB) technology-based wearable devices. Increase in production ramp of such wearables is opening up new opportunities for industry participants. Innovation is Opening New Business Avenues
Rapid proliferation of IoT, wearables, drones, VR/AR devices, autonomous cars, and ADAS is expected to drive demand for RF semiconductor products beyond smartphone devices, which favors industry prospects. Notably, RF Semiconductors are setting the pace for technology modernization, consequently digitizing aspects like connectivity, healthcare, transport, defense, among others.
For instance, Qorvo is gaining from rapid adoption of GaN for high-power defense applications and emerging healthcare applications. Diversified utilization of RF Semiconductor products bodes well for the industry players. Moreover, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm and 3 nm technology is anticipated to bolster the industry's prospects.
Further, the roll out of new bands and band combinations has led to considerable design challenges for OEM smartphone manufacturers. The industry participants, like Qorvo, are looking to address these challenges with a robust range of antenna-plexers portfolio utilizing BAW technology.
: The industry players are reeling under the impact of the coronavirus crisis-induced macroeconomic woes. The COVID-19 crisis led to the imposition of lockdowns that had previously compelled semiconductor companies to shut down production facilities temporarily. Coronavirus Crisis Induced Macroeconomic Weakness to Hinder Prospects
The business impacts stemming from supply chain disruptions due to social distancing and shelter-in-place restrictions raises concerns regarding the industry's prospects amid increasing infected cases. Although vaccination efforts have triggered gradual reopening of economies in several parts of the world, production delays remain an overhang.
Moreover, the U.S.-China trade war induced tariffs and Huawei ban have been hindering growth of the industry participants for quite some time now. Markedly, the industry players generate significant portion of their revenues from China.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Zacks Semiconductors - Radio Frequency Industry is housed within the broader Zacks
Computer and Technology sector. It carries a Zacks Industry Rank #82, which places it at the top 32% of more than 250 Zacks industries.
Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group's earnings growth potential. While the industry's earnings estimate for 2021 has moved up 44.7% since Sep 30, 2020, the same for 2022 has improved 18.7%.
Before we present a few stocks, that you may want to add to your portfolio, given the bright prospects, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Semiconductors - Radio Frequency Industry has outperformed both the S&P 500 and its own sector in the past year.
The industry has gained 79.2% over this period compared with the S&P 500's and broader sector's rally of 50.7% and 62.6%, respectively.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings ratio (P/E), which is a commonly used multiple for valuing Semiconductors - Radio Frequency stocks, the industry is currently trading at 18.18X, lower than the S&P 500's 22.1X and the sector's 26.39X.
Over the past five years, the industry has traded as high as 24.12X and as low as 10.01X, with the median being at 13.55X.
3 Semiconductor RF Stocks to Keep a Close Eye on Skyworks: Skyworks is benefiting from increasing demand for 5G handsets. Moreover, the Irvine, CA-based company's Sky5 product portfolio facilitated several 5G smartphone launches, and its offerings were selected by Samsung, VIVO, Xiaomi and other Tier-1 players.
Further, this currently Zacks Rank #1 (Strong Buy) company's diversified portfolio positions it well to capitalize on momentum witnessed across telemedicine, emergency response applications and remote work, online learning, and video streaming triggered by coronavirus crisis. You can see
. the complete list of today's Zacks #1 Rank stocks here
Markedly, shares of Skyworks have appreciated 97.6% in the past year. The Zacks Consensus Estimate for fiscal 2021 earnings for the company has improved 36.2% to $10.27 per share over the past 60 days, indicating year-over-year growth of 67.5%.
Qorvo: Qorvo, currently carrying a Zacks Rank #2 (Buy), is riding on gains from increased demand for 5G handsets and robust improvement in the Infrastructure and Defense Products business.
Strength in smartphone vertical, upgrades in 5G smartphones, and gains from consistent growth in 5G infrastructure, power management, and defense end-markets is anticipated to drive financial performance.
Additionally, the roll-out of Wi-Fi 6 and 6E technologies, and growing clout of precision location applications based on UWB technology are favoring the company's prospects. Also, innovation in biotechnologies is opening new avenues of business.
Solid uptake of BAW antenna-plexers, amid reopening of economies, is expected to boost top-line growth. Moreover, expanding portfolio of 5G base solutions amid accelerated deployment of 5G bodes well. Besides, growing momentum for Qorvo's GaN technology-based solutions is a positive.
Notably, shares of Qorvo have soared 113.5% in the past year. The Zacks Consensus Estimate for fiscal 2021 earnings for the Greensboro, NC-based company has been revised upward by 9% to $9.45 per share in 60 days' time, indicating year-over-year growth of 49.3%.
Resonant: Resonant is well-poised to benefit from the growing clout of its high-performance XBAR 5G filters in mobile devices.
Markedly, on Mar 15, 2021, this Austin, TX-based company noted that utilizing its technology, its customers have shipped over 53 million units to date.
Moreover, this presently Zacks #3 (Hold) Ranked company, remains well-positioned to reap benefits from the robust uptake of high-value band designs in the automotive market, which is recovering amid reopening of economies.
Management is optimistic regarding the application of its XBAR technology in high frequency Wi-Fi devices.
Resonant stock has skyrocketed 180.6% in the past year. The Zacks Consensus Estimate for 2021 bottom line narrowed in the past 30 days from loss of 31 cents to a loss of 29 cents per share. The company reported net loss of 55 cents in 2020.
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