Jim Cramer shares his post-earnings outlook on Qualcomm stock

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on Nov 3, 2022
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  • Qualcomm lowers its outlook for the current financial quarter.
  • Jim Cramer explains why he's been selling Qualcomm stock.
  • Shares of the U.S. chipmaker are now down 45% for the year.

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Shares of Qualcomm Inc (NASDAQ: QCOM) are down nearly 10% on Thursday after the chipmaker lowered its guidance for the current financial quarter citing a slowdown in demand for smartphones.

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Cramer reacts to Qualcomm’s earnings report

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The multinational now sees up to $10 billion in revenue this quarter – roughly $2.0 billion short of the Street estimates, as per the earnings press release.

Its outlook for $3.0 to $3.30 of EPS in Q1 also fell shy of $3.43 that experts had forecast. Reacting to its quarterly update on CNBC’s “Squawk on the Street”, Jim Cramer said:

Qualcomm was very disappointing. I know that CEO Cristiano thought the Internet of Things and Auto will save them. But there was a slowdown in everything. [The guidance] is brutal.

The semiconductor company forecasts up to $8.3 billion in QCT sales versus analysts at $10.42 billion.

Cramer has been selling Qualcomm stock

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At about 9 times forward, Cramer agrees the stock is inexpensive but warns that it’s just not the environment to own the chip stocks.

We’ve been selling Qualcomm, sold some this week for the Charitable Trust because we just felt all the semis are awful. Qualcomm believes it’s a two-quarter inventory glut. But two quarters is really far.

Competition from the likes of Apple and Samsung is a significant headwind for Qualcomm Inc as well. He’s also dovish on the stock after the U.S. Federal Reserve said rates will have to go higher than previously expected and that it’s “very premature” to be thinking of pausing just yet. (find out more)

That signals more pain ahead for the tech stocks.

Cramer dubs China a notable headwind

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Then, of course, there’s China.

According to Cramer, that’s making things all the more difficult – be it because of the U.S. restrictions on business with China since Qualcomm is a notable supplier for many of the Chinese handset manufacturers; or China’s notorious zero-COVID policy that continues to meaningful hurt demand, including for smartphones.

The policies of China are simply not conducive to earnings surprises. China was the weakness for Qualcomm.

For the year, Qualcomm stock is now down about 45%.

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