Qorvo dips as Morgan Stanley cuts rating on ‘limited upside’

Qorvo (NASDAQ:QRVO) was in focus on Friday as Morgan Stanley downgraded the semiconductor company, citing “limited upside” and a lack of catalysts in the near-term.

Shares fell 2% in premarket trading.

“We see limited upside near term around a weaker Android supply chain and weak broad market conditions, which is limiting the gross margin recovery that we have been looking for,” analyst Joseph Moore wrote in a note to clients. “We remain constructive longer term, but see a balanced risk reward over the next couple of quarters.”

Moore lowered his rating on Qorvo to Equal-Weight from Overweight and trimmed his price target to $120 from $130.

In addition, the theme of bringing artificial intelligence to the edge should help the smartphone cycle, but Qorvo is unlikely to be a large beneficiary, at least initially, Moore added.

“Apple Intelligence looks to be the initial Edge AI winner, and our US hardware team has high conviction this will [lead] to a multi-year upgrade cycle,” Moore continued. “While Qorvo is committed to increasing exposure to Apple (AAPL), they are underrepresented in the iOS ecosystem and are still primarily seen as an Android play. Since Edge AI is expected to initially be in the premium tier, where we expect Android to lose share next year, we are less excited about Edge AI as a catalyst for Qorvo.”

Analysts are largely cautious on Qorvo (QRVO). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates QRVO a HOLD.