Qorvo, Inc. (QRVO - Free Report) concluded the previously announced additional offering of $270 million principal amount of 5.50% Senior Notes due 2026. These additional notes once placed will be an unsecured senior liability of Qorvo. Notably, interest for these additional notes will be paid semi-annually.
The notes have been offered to qualified institutional buyers under Rule 144A, which is exempted from registration requirements under the United States Securities Act of 1933. The company intends to utilize the proceeds of additional notes to address general corporate purposes. We believe that these notes will provide financial flexibility to the company and fuel long-term growth.
Qorvo’s Cash Position
As of Dec 29, 2018, cash and cash equivalents were $649.7 million compared with $557.9 million reported in the previous quarter. Long-term debt was $714.4 million as compared with $735.1 million at the end of the previous quarter.
In third-quarter fiscal 2019, Qorvo generated operating cash flow of $333 million, up from $214.5 million in the previous quarter. Free cash flow during the quarter came in at $261 million.
Notably, the company repurchased shares worth $152 million under the share repurchase program during the last reported quarter.
Qorvo has an excellent earnings surprise history. The company has surpassed the Zacks Consensus Estimate in the prior four quarters, recording average positive surprise of 17.82%. We expect the company to record earnings growth of 5.2% and 3.5% in 2019 and 2020, respectively.
Qorvo is benefiting from robust adoption of its wireless connectivity and base station solutions. Further, solid demand for Gallium Nitride (GaN) integrated front end modules for high-power applications bode well over the long haul.
However, weakness in flagship smartphone product volumes and softness in China domestic market is an overhang at least in the near term. In fact, Qorvo anticipates Mobile Products revenues in the fourth quarter to be down roughly 25% sequentially, primarily owing to seasonal declines.
Further, customer concentration, particularly from Apple (AAPL - Free Report) on account of lesser-than-expected demand of latest iPhones is a significant headwind for Qorvo.
Zacks Rank & Stocks to Consider
Currently, Qorvo carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Cadence Design Systems, Inc (CDNS - Free Report) and Symantec Corporation (SYMC - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cadence Design and Symantec have a long-term earnings growth rate of 12% and 7.9%, respectively.
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