What Happened?
Shares of communications chips maker Qorvo (NASDAQ: QRVO) jumped 11.2% in the morning session after the company reported preliminary second-quarter financial results that topped expectations and announced it had agreed to merge with rival chipmaker Skyworks Solutions in a deal valued at approximately $22 billion.
The strong earnings report showed revenue of about $1.06 billion and non-GAAP diluted earnings per share of $2.22, both of which surpassed the company's prior guidance. Alongside the positive results, Qorvo announced the definitive agreement to combine with Skyworks. The cash-and-stock transaction meant Qorvo shareholders would receive $32.50 in cash and 0.960 of a Skyworks share for each share held. This merger was intended to form a U.S.-based leader in high-performance radio frequency, analog, and mixed-signal semiconductors.
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What Is The Market Telling Us
Qorvo’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. But moves this big are rare even for Qorvo and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 15 days ago when the stock gained 4.8% on the news that investor fears eased as President Trump softened his tone regarding trade relations with China. Following a sharp selloff late last week fueled by threats of an additional 100% tariff on Chinese goods, the president's more conciliatory weekend message that "it will all be fine" sparked a broad market rally. The semiconductor sector, which is particularly sensitive to international trade policies due to its global supply chains, was among the biggest beneficiaries of the improved sentiment. Chipmakers had posted significant declines during the previous week amid escalating tariff concerns. The reversal in tone helped these stocks recover a substantial portion of their recent losses as investors bought back into the sector, relieved that trade tensions might not escalate further.
Qorvo is up 47% since the beginning of the year, and at $102.55 per share, has set a new 52-week high. Investors who bought $1,000 worth of Qorvo’s shares 5 years ago would now be looking at an investment worth $820.62.
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