Karishma Vanjani
In a bad omen for Apple ahead of its earnings, Qorvo, a supplier of components for the big tech company, offered a weak outlook.
Qorvo, which makes radio-frequency chips for connectivity in iPhones, iPads, Apple Watches, and other wireless devices, relies on Apple -- its largest customer -- for 46% of its sales. Samsung accounts for 12%, data for the fiscal year that ended in March show.
Late Wednesday, Qorvo said it expects adjusted earnings to come in between 60 cents and 80 cents a share this quarter. That is far less than the $1.27 analysts had expected, according to FactSet. Revenue is expected to be between $825 million and $875 million, while analysts had expected $924 million.
Management said revenue can grow "modestly" in the current fiscal year, ending next March.
The underwhelming outlook comes against the backdrop of a more difficult market for iPhones, particularly in China, where competition remains rampant. Counterpoint Research data last week showed iPhone sales fell 19% in the first quarter, while rivals Xiaomi and Huawei saw gains.
Apple reports earnings on Thursday after the market closes.
"We believe weaker iPhone volumes and lumpiness in Defense are impacting Jun-24Q outlook as well as FY25 commentary (for modest revenue growth)," Raymond James' Srini Pajjuri wrote about Qorvo. He lowered his target for the stock price to $115 from $120, but still maintained an Outperform rating.
One reason for keeping that rating, which is the equivalent of a Buy, was management's commentary. Despite the downbeat outlook, CEO Robert Bruggeworth reiterated that Apple represents a "multiyear growth opportunity." Qorvo's best source of potential growth remains in increasing the dollar value of the parts it sells for Apple devices, he said on a call to discuss the results.
Earnings were better than expected. For the March quarter, it posted earnings of $1.39 per share, compared with the $1.21 analysts had penciled in. Revenue of $941 million also came in higher than the consensus of $927.2 million.
Still, investors punished the stock. It fell 11% to $100.06 after the market opened. The stock has gained 6.5% over the past year.
Qorvo's update follows downbeat news from Skyworks, a supplier of analog and mixed-signal chips. It said this week that in the quarter ended in March, it encountered "below normal trends" in its mobile phone business. The company gets 66% of its revenue from Apple.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 02, 2024 11:00 ET (15:00 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments