Don’t Panic if TriQuint Falters in the Second Quarter

By Harsh Chauhan - July 13, 2012 | Tickers: AAPL, CRUS, TQNT | 0 Comments

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The feeling when you see your recommendation come good -- priceless. Remember I had told you that TriQuint Semiconductor (NASDAQ: TQNT) looked like a good bet more than two months back after posting its first quarter results. The company had managed to top estimates, but committed a sin by following it up with a guidance that fell way behind projections.

However, I had faith in TriQuint’s prospects and told you that the stock’s 13% drop following its earnings presented an opportunity to make some money. And since then it has recouped almost 7% of its value as of this writing after Tuesday's trading action, beating the tech-heavy NASDAQ, which has lost 5% over the same time, comprehensively. But there’s more to TriQuint, as I believe its potential hasn’t been fully realized.

What to expect

TriQuint reports its second quarter later this month, and I am looking forward to the Street’s reaction. As I said, a terrible guidance had led investors to draw the knives last time. Its revenue projections of $170 million to $185 million were nowhere near the Street’s $224 million. This effectively means that TriQuint investors should brace themselves for a steep drop in revenue for the second quarter. But here’s where things get interesting.

TriQuint depends on Apple (NASDAQ: AAPL) for more than one-third of its revenue, and Apple might be in for a low key quarter. According to Fool analyst Eric Bleeker, the Cupertino-based giant might not have enough firepower to blast through the roof this quarter. The iPhone 4S is nearing its end and there are not many catalysts to drive sales. Hence, TriQuint’s subdued outlook traces its roots back to Cupertino.

Also, TriQuint isn’t alone in the league of muted outlooks. Apple supplier Cirrus Logic (NASDAQ: CRUS) spoke on the same lines while commenting on its expectations for the next quarter. Cirrus CEO Jason Rhode had said that the company would see a massive jump in revenue toward the back-end of the year, which means that he expects the next iPhone to drive sales higher.

Making a strong case

But this is the proverbial lull before the storm. With the next version of the iPhone scheduled for a launch this fall, I expect TriQuint to ride the wave and hit the jackpot. And then there’s the mightily rumored iPad mini, which might hit stores in September or October. TriQuint has won slots in both the previous iPads and I’m counting on the trend to continue with the iPad mini.

Apart from Apple, TriQuint also supplies components to Samsung and, more importantly, the innards of the hugely successful Samsung Galaxy S III seat TriQuint’s chips. The S III has propelled the Korean giant to an operating profit of $5.9 billion in the second quarter, and might even help TriQuint to post better revenue than it had earlier guided for. TriQuint has a pretty strong relationship with Samsung, which has grown stronger over time. Samsung gave TriQuint spots in the Galaxy S II and now the S III, with further ramp-ups expected going forward.

The takeaway

In a nutshell, if TriQuint’s stock flounders after its earnings reports, I would once again say that it’s an opportunity for investors to get in. Its strong relationship with Apple and a budding friendship with Samsung are reasons for my bullishness. The stock has seen some difficult times in past, but things seem to be getting better for TriQuint. Are you listening? 

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