Did TriQuint's Drop Open Up a Window of Opportunity?
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Almost all of the component suppliers who rely on the largest company on earth for a key portion of their bread and butter were in a celebratory mood last week. However, there was one who didn’t make it to the bash. TriQuint Semiconductor (NASDAQ: TQNT) fell almost 13% after the company posted first quarter results. Although TriQuint edged past estimates, it issued a depressive guidance for the ongoing quarter, sending its shares into a tailspin.
I agree that TriQuint’s guidance came in way behind what the Street was expecting, but did the stock deserve such a thrashing? Let’s find out.
A brief snapshot of the quarter
TriQuint’s top line dropped 5% in the quarter to $217 million from last year. The decline can be attributed to factors such as an 8% fall in Mobile Devices revenue and a 4% decline in its Defense and Aerospace business. However, the company saw an improvement in its network infrastructure business.
The Mobile Devices division accounted for 68% of TriQuint’s revenue, and Foxconn, a proxy for Apple (NASDAQ: AAPL), was responsible for 37% of total revenue. Thus, even though TriQuint depends on Foxconn (read as Apple) to drive its revenues, its exposure isn’t as great as other suppliers such as Cirrus Logic (NASDAQ: CRUS). The overall drop in Mobile Devices business could have been a result of seasonality. It could also be because TriQuint supplies chips to Nokia and Research In Motion, and we know that both are lagging behind in the smartphone race.
But don’t lose hope
Now let’s come to the reason why TriQuint got thrashed. It is projecting revenue in the range of $170 million to $185 million, way behind the $224 million modeled by analysts. The cause of such a grand miss is lower revenue from its largest customer Foxconn/Apple. Fool analyst Eric Bleeker has rightly pointed out the reasons why the current quarter can be a muted one for Apple and its suppliers.
However, TriQuint expects to pick up the pace in the latter half of the year; a comment which we have heard from two other suppliers in the form of Cirrus and Skyworks Solutions, suggesting that they are getting ready for the next iPhone. A striking thing which I noted is that even Cirrus expects a low key quarter this time around, and will probably miss estimates; however, the Street gave Cirrus a pat on the back and punished TriQuint even though both forecasted a similar pattern. So, any investor who has suffered in the aftermath of TriQuint’s earnings shouldn’t lose heart, as the best is yet to come later this year.
Eric says that he has lost a lot of money on TriQuint, but will hold on till the next iPhone to make the most out of an expected surge. Taking a leaf out of his plan of action, I would actually say that the drop in TriQuint’s price might just about make it a smart investment choice if you are looking to make some money when the next iPhone launches.
TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Cirrus Logic, and TriQuint Semiconductor. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.