Qorvo has a chance to outperform after a major activist investor got involved with the company, according to Morgan Stanley. Analyst Joseph Moore upgraded the semiconductor and radio frequency chipmaker to overweight from equal weight and lifted his price target by $16 to $106. That suggests 25.9% potential upside for the stock, which rallied last week after Starboard Value unveiled a 7.7% stake in the company. Qorvo shares are now up roughly 20.4% this year, significantly outpacing gains from the broader market. The stock rose about 1.4% in premarket trading. Moore thinks that Starboard's involvement could lead to "a renewed earnings recovery path." "We see an attractive risk reward profile at current stock levels," the analyst said in a Tuesday note to clients. "Given Starboard's track record in semis and history with QRVO, we see the opportunity to potentially unlock significant value from a strategic course correction." QRVO 1Y mountain Qorvo stock performance. The analyst said Qorvo's earnings per share growth can come from "operational efficiencies," such as increasing external manufacturing and focusing on cash generation from its radio frequency business. A rebound in the smartphone market is not necessary for the analyst's thesis. "QRVO has struggled to achieve margin targets, but activist influence could inject some urgency," Moore said in the note. "We believe Qorvo can achieve $9.63 in EPS if the strategy shifts from a "growth through diversification" mindset into one that optimizes around their core RF proficiency." Moore outlined three opportunities he believes the company has to boost its earnings growth: Finding ways to reduce — but not eliminate — internal fab usage to stabilize the company through volatile periods in the smartphone cycle and better manage gross margins Realigning its operating expenses around the company's core radio frequency portfolio, as Qorvo's operating expenses are significantly higher than its peers Taking advantage of Qorvo's discounted multiple and shift use of cash return to buybacks, given the amount of customer and business concentration Moore's upgrade puts him in the minority of those who cover the chipmaker. Most analysts rate the stock as a hold, according to LSEG. The average price target on shares implies just 3.7% upside ahead.
