By Mackenzie Tatananni

Qorvo stock could get a boost on the back of an activist's involvement, Morgan Stanley analysts said as they upgraded shares of the chip maker to Overweight from Equal Weight.

Shares of Qorvo climbed 4.1% to $87.66 as analysts led by Joseph Moore upgraded the stock and raised the price target to $106 from $90, suggesting a potential 22% upside.

"We have seen value in QRVO stock, and have unsuccessfully tried to capture it a couple of times with upgrades that worked only modestly," Moore wrote.

The most recent catalyst for an upgrade came as Qorvo announced that Starboard Value, a New York-based hedge fund, had taken a 7.7% stake in the company, according to a filing on Friday.

Qorvo's core business centers on the design and production of radio frequency $(RF)$ technologies for mobile, infrastructure, and the defense and aerospace markets. The company counts Apple among its biggest customers.

In Moore's view, the RF market served by Qorvo and peers like Broadcom and Skyworks "will be a growth market, but one which will remain very concentrated with high-end global phones."

The analyst noted that RF companies have historically struggled to achieve sustainable multiple expansion, which has driven them to diversify, or branch into new products and markets.

However, Starboard's involvement brings the potential for a renewed earnings recovery path, Moore said.

He sees Qorvo achieving earnings of $9.63 a share "if the strategy shifts from a 'growth through diversification' mindset into one that optimizes around their core RF proficiency."

While Qorvo has "struggled to achieve margin targets" in the past, "activist influence could inject some urgency," Moore said.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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January 21, 2025 12:07 ET (17:07 GMT)

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