Qualcomm’s outlook suggests it’ll take a few more quarters to ‘hit a bottom’

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on May 3, 2023
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  • Qualcomm reports better-than-expected revenue for its fiscal Q2.
  • Susquehanna analyst shares his view on the semiconductor company.
  • Qualcomm stock is now roughly flat versus the start of the year.

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Qualcomm Inc (NASDAQ: QCOM) is trading down in extended hours even though it reported better-than-expected revenue for its second financial quarter despite the slowdown in handset demand.

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Why is Qualcomm stock down?

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The semiconductor stock is under pressure because the management said inventory issues will remain for the next two quarter at least. To that end, Qualcomm forecasts $1.70 to $1.90 of per-share earnings in its current quarter on up to $8.9 billion in revenue.

In comparison, analysts were at $2.17 a share and $9.13 billion, respectively. Reacting to the earnings print, Susquehanna analyst Chris Rolland said:

On the handset side of things in China, it’s a bloodbath right now. You have demand way down from COVID levels. In addition, you have a massive overhang of handset inventory.

Qualcomm stock is now back to the price at which it started the year.

Notable figures in Qualcomm Q2 earnings report

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  • Net income printed at $1.7 billion versus the year-ago $2.93 billion
  • Per-share earnings also declined significantly from $2.57 to $1.52
  • Adjusted EPS came in at $2.15 as per the earnings press release
  • Total revenue tanked 18% year-over-year to $9.28 billion
  • FactSet consensus was $2.15 a share on $9.09 billion in revenue

Should you buy Qualcomm shares?

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Handset and IoT sales were down 17% and 24% respectively. Auto sales, however, increased 20% in the recently concluded quarter. On CNBC’s “Closing Bell: Overtime”, Rolland noted:

Apple is weak, android is also weak and doesn’t seem to be bouncing. There’s a ton of inventory in China. So, it’ll be a quarter or perhaps two before Qualcomm and everything handset related hits a bottom.

Still, the Susquehanna analyst likes Qualcomm stock as a long-term investment. His $135 price target suggests about a 30% upside from here.

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