This small Apple supplier is a way to ride ‘healthy’ iPhone demand in China, KeyBanc analyst says

Qorvo shares will rise as the chipmaker benefits from improving phone demand in China, according to KeyBanc Capital Markets.

The firm raised its rating on Qorvo shares to overweight from sector weight, predicting the chipmaker will report earnings per share above expectations in its next fiscal year.

“We are upgrading QRVO … given healthy China smartphone trends, stabilizing iPhone demand, and greater than expected market share gains in China smartphones,” analyst John Vinh said in a note to clients Wednesday. “We believe the healthy handset demand environment for China and Apple sets up well for the stock to outperform in the 2H in conjunction with share gains in China and content gains in the new iPhone.”

The company manufactures radio frequency semiconductors, which enable the ability for smartphones to communicate with wireless networks. The Greensboro, North Carolina-based company has a market value of $10 billion.

Vinh started his price target for Qorvo shares at $95, representing 23 percent upside from Tuesday’s close.

The analyst said conversations with Asian supply chain companies revealed Qorvo is taking “meaningful” share for its products from Skyworks Solutions in China. He also noted iPhone demand isn’t getting materially worse, according to his checks.

“Consistent feedback from multiple supply-chain partners across the iPhone ecosystem indicates that demand for both the iPhone 8 as well as the X has stabilized,” he said. “Feedback consistently indicates that demand in the 2Q has been largely in line with expectations, while a few partners indicate demand in the quarter was slightly weaker than original expectations.”

Vinh estimates Qorvo will generate earnings per share of $6.41 in its fiscal 2019 versus the Wall Street consensus of $5.87.

The company’s stock is up 16.3 percent so far this year through Tuesday versus the S&P 500’s 1.5 percent gain.