Qualcomm Falls After Mixed Earnings And Soft Guidance
Fell after the chipmaker reported fiscal third-quarter earnings in line with expectations but warned on current-quarter profit. The company also said it will…
Qualcomm stock fell after the chipmaker reported fiscal third-quarter earnings that matched analyst expectations and issued lighter guidance for the current quarter. Shares dropped in extended trading after the report, with the company pointing to a continuing supply crunch for computer parts, especially memory.
The move came after Qualcomm closed the latest regular session at $184.79, down 2.08% from the previous trading day, according to Yahoo Finance. That performance lagged the S&P 500, which gained 0.79% that day, while the Dow added 0.26% and the Nasdaq climbed 1.52%.
Investors have had a rougher month with the stock. Before the latest session, Qualcomm shares had lost 17.59% over the past month. Over the same stretch, the Computer and Technology sector fell 4.61% and the S&P 500 declined 1.82%, Yahoo Finance reported.
Qualcomm stock faces pressure after guidance reset
For the quarter, Qualcomm posted adjusted earnings per share of $2.21, versus $2.23 estimated by LSEG, and revenue of $9.95 billion, ahead of the $9.67 billion estimate. That kept the headline results close to forecasts, but the company’s outlook weighed more heavily on the market.
Qualcomm said it expects adjusted earnings per share of between $2.05 and $2.25 in the current quarter, with revenue between $9.7 billion and $10.5 billion. LSEG-pollled analysts had expected $2.36 in adjusted earnings per share on $10.02 billion of sales. The gap matters because traders often price chip stocks on where demand and margins are headed next, not just on the quarter that just ended. That was the message here.
CEO Cristiano Amon said in an interview with CNBC that the company is taking concrete measures to expand margins, including raising prices across the board starting on September 1 for chips that mostly go to smartphone makers. He also said Qualcomm is looking for other ways to streamline its supply chain. “Cost went up, prices are going to go up,” Amon said.
Qualcomm said the semiconductor industry is dealing with a broad-based increase in input costs across wafer fabrication, assembly, test, advanced packaging, memory and other materials. At the same time, the company said, “revenues continue to be healthy.”
The handset business remains the largest slice of Qualcomm’s chip sales, but the company is trying to diversify. Amon said Qualcomm is looking at cars, smart glasses and robots, and is targeting non-smartphone sales to be 60% of the company’s revenues next year.
That shift is the bigger story behind the stock reaction. Smartphone demand still drives a large part of Qualcomm’s business, so any squeeze on that market can show up fast in margins and guidance. The company’s push into other categories gives it a longer runway, but investors will be watching whether those newer lines can offset weakness in handsets soon enough to support the shares.
Yahoo Finance also cited Zacks Consensus Estimates showing full-year earnings of $10.77 per share and revenue of $42.77 billion, implying changes of -10.47% and -3.1% from the previous year. Qualcomm’s Zacks Rank stands at #3, or Hold, after the Zacks Consensus EPS estimate shifted 0.06% downward over the past month.
The next catalyst is now the market’s reaction to Qualcomm’s updated pricing plan and the company’s ability to defend margins while supply costs stay elevated.
