Qorvo's EPS Could Reach $9.63 by 2026 with Starboard's Activist Involvement, Morgan Stanley Upgrades Stock

In the ever-evolving world of semiconductors, one company has caught my eye: Qorvo (QRVO). With the recent involvement of activist investor Starboard Value, I believe Qorvo has the potential to achieve an EPS of $9.63 by 2026. Let's dive into the reasons behind this optimistic outlook and explore how Morgan Stanley's upgrade of Qorvo's stock reflects the market's sentiment towards the company's potential under activist involvement.

First, let's address the elephant in the room. Qorvo's stock has taken a beating in recent years, dropping by 29% over the past year. However, the recent upgrade by Morgan Stanley from "Hold" to "Buy" suggests that the market is bullish on Qorvo's prospects, especially with Starboard Value's 7.7% stake in the company. This upgrade indicates that Morgan Stanley believes Starboard's involvement could lead to shareholder-friendly moves and potentially improve Qorvo's performance.

Now, let's discuss the potential EPS growth for Qorvo by 2026. Analysts predict EPS growth of 29.21% by 2026, but I believe that Starboard's activist involvement could accelerate this growth. Starboard has a history of successful turnarounds in the semiconductor industry, having installed CEOs at Marvell Technology and On Semiconductor, both of which saw significant stock upside since their respective appointments. Given Qorvo's recent struggles, Starboard's involvement could lead to a strategic shift or leadership change, driving EPS growth and improving the company's performance.

To achieve an EPS of $9.63 by 2026, Starboard could implement several operational improvements and cost-cutting measures. For instance, they could focus on improving operational efficiency by streamlining production processes and supply chain management. This could involve optimizing the utilization of Qorvo's 7 production sites located in the United States (3), China (2), Costa Rica, and Germany. By doing so, Starboard could potentially reduce overhead costs and increase efficiency.

Another strategy could be to reduce Qorvo's dependence on Apple, which accounts for over one-third of its revenue. To mitigate the risk associated with relying too heavily on a single customer, Starboard could work with Qorvo to diversify its customer base. This could involve expanding into new markets or industries, such as defense and aerospace, or increasing sales to other smartphone manufacturers.

Investing in high-growth segments, such as the HPA and CSG segments, could also drive EPS growth. The CSG segment serves both the consumer and Industrial Internet of Things (IIoT) connectivity markets, which are expected to grow significantly in the coming years. By allocating more resources to these segments, Qorvo could tap into these high-growth markets and drive long-term growth.

Cost-cutting measures, such as reducing marketing spend or consolidating certain departments, could also help Qorvo achieve its EPS target. Starboard could work with Qorvo to optimize its research and development (R&D) expenses, ensuring that the company is investing in the right technologies and products to drive growth.

Mergers and acquisitions (M&A) could also play a role in Qorvo's growth strategy. Starboard could explore strategic M&A opportunities to help Qorvo expand its product offerings, enter new markets, or gain a competitive advantage. For example, they could look for companies with complementary technologies or expertise in high-growth markets, such as 5G and 6G infrastructure or the Internet of Things (IoT).

Improving capital allocation could also help Qorvo achieve its EPS target. Starboard could work with Qorvo to optimize its capital allocation strategy, ensuring that the company is investing in the right areas to drive long-term growth. This could involve reallocating resources from lower-growth segments to higher-growth opportunities, or repurchasing shares to boost EPS.

In conclusion, Qorvo has the potential to achieve an EPS of $9.63 by 2026 with the involvement of activist investor Starboard Value. Morgan Stanley's upgrade of Qorvo's stock reflects the market's positive sentiment towards the company's potential under activist involvement. By implementing operational improvements, cost-cutting measures, and strategic M&A, Qorvo could drive EPS growth and improve its performance. As an investor, I am bullish on Qorvo's prospects and believe that the company has the potential to achieve its EPS target with the right strategic direction and execution.