In a significant turnaround, Qualcomm (QCOM.O) experienced a nearly 6% surge on Thursday, underpinned by robust first-quarter forecasts that indicated a potential alleviation of the prolonged two-year slump in the smartphone market, particularly marked by a recovery in China.
Qualcomm Market Value Escalation
As a key player in chip design for smartphones, Qualcomm’s market value was poised to escalate by almost $7 billion, driven by its current share price of $117.09.
Following four consecutive quarters of decline in its core smartphone business, Qualcomm is now witnessing a promising resolution to the inventory buildup in the Android sector, with a resurgence in chip orders.
Projections for revenue and profit in the final quarter of the year surpassed Wall Street estimates, with the company anticipating a remarkable 35% quarter-on-quarter upswing in sales to Chinese smartphone clients.
Analysts Perspectives
Canaccord Genuity analysts noted, “While management still anticipates a less-than-normal seasonal uptick in the December quarter, the guidance was better than anticipated, with signs of inventory improving ahead of last quarter’s expectations.”
Addressing concerns about competition from Huawei (HWT.UL) and Samsung (005930.KS), both of which have transitioned to using their own chips, Qualcomm’s CEO, Cristiano Amon, expressed confidence in retaining a “majority share” of chips in Samsung’s upcoming S24 line. Moreover, Amon downplayed potential impacts from Huawei’s re-entry into the market, affirming no adverse effects on Qualcomm’s relationships with Chinese smartphone companies.
Stacy Rasgon, an analyst at Bernstein, observed, “While some narrative headwinds (the use of in-house chips at Huawei and Samsung) still exist, we may find the market recovery/normalization off that trough may offset those eventualities.”
Analyst Ratings and Concerns
Reflecting this positive momentum, at least nine analysts upgraded their ratings on Qualcomm’s stock, resulting in an average rating of “buy,” according to LSEG data. However, persistent concerns about the duration of the smartphone slump led to nine price target cuts, setting Wall Street’s median view at $139.50.
Although Qualcomm’s shares have shown minimal change this year, trading at nearly 12 times their 12-month forward earnings estimates, they still present an attractive proposition in comparison to Nvidia’s 27.2, a factor contributing to the current market optimism surrounding Qualcomm.
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