Qorvo, Inc. (QRVO) stock took a nosedive on Wednesday, plummeting over 25% after the company released its second-quarter financial results. While Qorvo managed to beat analyst estimates for both earnings and revenue, the company’s guidance for the third quarter was far from optimistic, sending shockwaves through the market.
Qorvo reported adjusted earnings of $1.88 per share, surpassing the analyst consensus of $1.85. Sales also came in above expectations at $1.04 billion, compared to the anticipated $1.02 billion. However, these positive numbers were overshadowed by the company’s outlook for the upcoming quarter.
Grant Brown, Qorvo’s Chief Financial Officer, attributed the weak forecast to shifts within the smartphone market. He noted that while the premium tiers of the market remain robust, the overall mix has shifted towards entry-level 5G Android devices, negatively impacting Qorvo’s revenue. This trend, according to Brown, is not expected to reverse in the near future, prompting Qorvo to implement cost-cutting measures, including factory consolidation and operating expense reductions.
Qorvo’s third-quarter earnings guidance also fell significantly short of expectations. The company anticipates earnings per share between $1.10 and $1.30, a stark contrast to the $1.92 per share analysts were anticipating. Revenue for the third quarter is projected to range between $875 million and $925 million, compared to the expected $1.05 billion.
The disappointing earnings report and cautious guidance triggered a wave of analyst adjustments. Exane BNP Paribas downgraded Qorvo from Outperform to Neutral, while Needham analyst Quinn Bolton maintained a Buy rating but lowered the price target from $135 to $100.
Other analysts followed suit, with BofA Securities, Craig-Hallum, Susquehanna, UBS, and Piper Sandler all adjusting their price targets and ratings. The collective sentiment reflected a cautious outlook for Qorvo’s future performance.
As a result of the negative news, Qorvo’s stock price plummeted, closing the day down 26.1% at $74.38. The stock’s steep decline highlights the market’s sensitivity to even minor changes in earnings expectations and the increasing challenges faced by companies operating in the rapidly evolving smartphone market.
