Qorvo Inc: Steadily Climbing 5G Stock Could Deliver More Gains

This 5G Stock Looks Interesting

One of the reasons some investors like tech stocks is the explosive gains that can happen from time to time.

But not all tech stocks are the same.

5G stocks, while certainly a fast-growing segment within tech, are not really known for shooting through the roof in one or two trading sessions. The reason is that many companies in the 5G sector are well-established and already have solid operations outside of 5G.

Still, investors of these (relatively) boring 5G stocks can earn very exciting returns. It’s just that the returns likely won’t happen overnight.

Check out Qorvo Inc (NASDAQ:QRVO), for instance.

Headquartered in Greensboro, NC, Qorvo is a semiconductor company that makes radio frequency systems. It serves multiple high-growth segments, such as advanced wireless devices; wired and wireless networks; and defense radar and communications. (Source: “We Are Qorvo,” Qorvo Inc, last accessed December 4, 2020.)

QRVO is not the most famous 5G stock, but the company has identified 5G as one of its long-term growth drivers.

Now, take a look at the following chart.

Qorvo Inc (NASDAQ:QRVO) Stock Chart

Chart courtesy of StockCharts.com

Like most stocks in the market, Qorvo shares tumbled during the COVID-19-induced sell-off in March. After that, they started to climb back up. But unlike some of the high-flying tickers that soared to new heights very quickly, Qorvo stock’s climb was slow but steady, as I shall explain.

In the above chart, I drew four horizontal lines that were significant to QRVO stock’s upward journey.

Line 1—around $105.00—was the first main resistance level that the stock encountered in May after it climbed out of the doldrums. And if you look further back, the $105.00 mark was also the starting point of the 5G stock’s plunge in March, meaning it could be a very critical price level.

By early June, Qorvo stock managed to successfully break above that resistance level, and line 1 became a support level for the next trading range.

Line 2—at roughly $120.00—was the next resistance level. Again looking back, this price level was significant because it was the previous top that QRVO stock formed before the pandemic.

In late July, shares of Qorvo Inc broke out of the trading range defined by lines 1 and 2 and moved into unchartered territory. It quickly encountered another resistance level at line 3, and traded in the range between line 2 (which became the new support) and line 3 for about three months.

The early-November rally allowed Qorvo stock to quickly surge beyond line 3.

While there was a new resistance level at line 4, the triangle pattern formed in November suggested a continuation in the uptrend. Indeed, by the end of that month, QRVO stock had successfully broken above line 4.

Put the picture together and you’ll see that the path of Qorvo stock was like climbing stairs. There was not a single day when it surged 30% like some of the hot tech stocks were doing. And while QRVO’s breakouts were strong, there was always consolidation afterward.

In other words, compared to the parabolic runs that some tech companies have enjoyed, QRVO stock was not “sexy.”

But steadily, the gains accumulated and became substantial. Since the end of March, the share price of this 5G stock has more than doubled.

Good Earnings Report

Qorvo has a growing business to back its rising stock price.

In the second quarter of its fiscal year 2021, which ended October 3, 2020, Qorvo generated $1.1 billion of revenue, representing a 31.4% increase year-over-year. (Source: “Qorvo Announces Fiscal 2021 Second Quarter Financial Results,” Qorvo Inc, November 4, 2020.)

The business also became more lucrative; the company’s adjusted gross margin expanded 520 basis points from a year ago to 51.7%.

At the bottom line, Qorvo earned adjusted net income of $2.43 per share. This marked a substantial improvement because, in the year-ago period, its adjusted profit was $1.52 per share.

The company’s president and chief executive officer, Bob Bruggeworth, said in the second-quarter earnings press release that “Strength was diversified across customers and supported by multiyear technology upgrade cycles, including 5G and Wi-Fi 6.” (Source: Ibid.)

Analyst Take

The rollout of 5G technology is just getting started, and will likely keep increasing in the years to come. This means the adoption of 5G technology should serve as a long-term catalyst for Qorvo Inc’s business.

As the company capitalizes on the trend, I wouldn’t be surprised to see Qorvo stock take another solid step to the upside.