The 5G smartphone market is about to explode in 2021. Apple Vendor Murata estimates that sales of 5G smartphones could exceed 500 million units in the new year, compared to 300 million units in 2020. Market research firm Strategy Analytics has a more aggressive forecast – predicts a 150% increase in 5G sales smartphones this year from 2020 estimated shipments of 250 million units.
Qorvo (NASDAQ: QRVO) offers investors one way to take advantage of this huge leap in 5G smartphone sales. The chipmaker supplies radio frequency chips to several major smartphone OEMs (original equipment manufacturer). Not surprisingly, Qorvo’s sales and revenues have accelerated dramatically recently – a trend likely to continue when the chipmaker releases its fiscal results for the third quarter of 2021 on Feb. 3. Here’s what to expect.
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Qorvo is about to make big gains again
Analysts expect Qorvo to achieve non-GAAP earnings of $ 2.66 per share on revenue of $ 1.06 billion for the December quarter. These estimates are in accordance with management guidelines and are well ahead of last year’s $ 1.86 in earnings per share and $ 869 million in revenue.
But don’t be surprised that the company is overshooting its own expectations. That’s because Apple, which reportedly accounts for a third of Qorvo’s revenue, may have scaled up its iPhone production in the last calendar quarter of 2020. Supply chain checks conducted by Wedbush Securities analyst Daniel Ives suggest Apple is close to 90 million iPhones in the fourth quarter, up from its original estimate of 65 million to 70 million units as of September 2020.
Such an impressive jump in iPhone production during the quarter doesn’t seem surprising, given that demand for the iPhone 12 is very strong. After all, it didn’t take long for the device to become the top-selling 5G smartphone worldwide, so only Apple could give Qorvo a nice lift and help it outperform Wall Street estimates when the company releases its results this week.
The party has just begun
Analysts believe Qorvo will be able to sustain its high growth rate with revenue growth of 19% year over year in the fiscal fourth quarter, while earnings are up 27% to $ 2.00 a share.
However, there is a high probability that Qorvo will exceed those estimates. Cowen analysts estimate that Apple could expand the number of iPhone builds to 55 million units in March, up 49% year-on-year. Wedbush has an even more aggressive forecast, estimating that the iPhone will have between 60 million and 70 million units built in the current quarter. In addition, momentum is also expected to continue into the second quarter of the calendar year, with Apple expected to make at least 40 million iPhone units.
All of this bodes well for Qorvo, given its close relationship with the tech giant. However, the chipmaker is on additional growth drivers such as SamsungThe recently launched flagship Galaxy S21. Qorvo has been a supplier of RF chips for Samsung’s Galaxy line of smartphones for years, including Galaxy S20 devices last year, and it has likely held its place in the new release.
That’s because Samsung’s Galaxy S21 Ultra comes with WiFi 6E connectivity, and Qorvo had indicated on its last revenue call that it “actively supports leading OEMs in the design of 6E platforms.” Counterpoint Research estimates that the Galaxy S21 shipments could surpass those of the Galaxy S20 in the middle of this year. That wouldn’t be surprising given that Samsung has lowered the base prices of the Galaxy S21 models by $ 200 compared to the previous S20 series.
Qorvo can support the success of its mobile customers and maintain its impressive growth rate. More importantly, investors should remember that the 5G smartphone market still has a lot of growth to offer as shipments could reach 1.5 billion units by 2025. In this environment, Qorvo can remain a top 5G player in the long run, and a strong performance in the upcoming earnings report should give investors the right push to buy the stock.