Qorvo (QRVO) has had difficulty meeting margin targets but activist pressure could create urgency, Morgan Stanley said in a note Tuesday.

The analysts said that with the involvement of activist firm Starboard, they see potential for Qorvo's earnings recovery. They believe Qorvo can achieve $9.63 in earnings per share if the company shifts its strategy from "growth through diversification" to focusing on its core radio frequency expertise.

There are three key actions Qorvo could take to achieve this: reduce, but not eliminate, internal fabrication usage to stabilize gross margins throughout business cycles, realign operating expenses to focus on the core RF portfolio, and use its undervalued stock to return cash and boost EPS growth, the analysts said, adding that given Starboard's history in the semiconductor industry and its past work with Qorvo, they believe there is a chance to unlock substantial value through a strategic shift.

"Our bull case assumes Qorvo will implement a restructuring plan and refocus their portfolio on RF. We believe such a new strategy could allow them to achieve $9.63 in EPS by 2026 if they can successfully realign their cost structure. We assume 48% gross margins and 25.8% operating margins by 2026, both aligned with their pre-COVID average from 2015 to 2019 and expectations for peer Skyworks," the analysts said.

Morgan Stanley upgraded Qorvo to overweight from equalweight and adjusted its price target to $106 from $90.

Price: 87.18, Change: +2.97, Percent Change: +3.53