Qualcomm slips after mixed Q1, in-line forecast as analysts see uneven road ahead

Qualcomm (NASDAQ:QCOM) shares slipped around 2.5% in early trading on Friday as the semiconductor company reported mixed fiscal first-quarter results and in-line guidance, prompting Wall Street analysts to say that there is an uneven road ahead.

Susquehanna analyst Christopher Rolland, who has a neutral rating on Qualcomm (QCOM), noted that the company’s “little confession” this quarter was probably better than feared.

“While handset revenue was impacted in the December quarter, the segment was constructively guided flat into March as they expect units to decline but [average selling price] to increase (i.e., as Apple mixed down in March),” Rolland wrote in a note to clients.

He added that the company’s technology licensing results and guidance also suffered due to the weak smartphone market and higher inventories, but the company’s diversification strategy continues to pay off, as automotive and internet of things are now 27% of total revenue.

“Short term, we consider this another setback for Qualcomm,” Rolland explained, adding that in the longer-term, CEO Cristiano Amon “is proving Qualcomm can … become a true broad-based semiconductor player, diversifying into RF, Auto, IoT and beyond.”

For the second-quarter, Qualcomm (QCOM) expects revenue to be between $8.7B and $9.5B, including $7.4B to $8B worth of revenue from its QCT segment. It also expects adjusted earnings to be between $2.05 and $2.25 per share.

Analysts expect Qualcomm (QCOM) to generate $9.41B in revenue and $2.24 per share in earnings.

Bernstein analyst Stacy Rasgon, who has an outperform rating and $155 per-share price target on Qualcomm (QCOM), noted that a weak market and high channel inventory are impacting the company in the near-term, but the stock is “very inexpensive.”

“[The] set-up into 2024 looks good as things normalize and [the] Apple (AAPL) business hangs around,” Rasgon wrote in a note to clients.

Bank of America analyst Tal Liani reiterated his buy rating on Qualcomm (QCOM) after the report, as there are a few positive factors in the short-term.

“…[E]xpectations are low and the environment could likely only improve from here as China potentially recovers in 2H and inventory drawdowns deplete channel inventories, which should drive better near-term demand,” Liani explained.

The analyst also pointed to the company’s QCT margins improving in the second-half of the year and the company’s diversification strategy beyond smartphones as positives.

Wells Fargo analyst Gary Mobley took a more negative view on the report and guidance, noting that shares are likely to be a “relative underperformer,” even when the semiconductor market starts to get better.

Last month, investment firm Mizuho Securities listed Qualcomm (QCOM) among its top picks in the semiconductor space for 2023.