Qualcomm slides as ‘weakening’ smartphone market concerns grow

Qualcomm (NASDAQ:QCOM) shares slid additional than 5% Thursday following the communications chipmaker provided weaker-than-envisioned fourth-quarter assistance as the “weakening” smartphone market is last but not least hitting the company.

UBS analyst Timothy Arcuri, who has a neutral rating on Qualcomm’s (QCOM) inventory, reduced his fiscal fourth-quarter estimates on the firm to a profit of $3.13 a share, on revenue of $11.43B, from a prior forecast of $3.35 a share, on $12.35B in income. Arcuri famous that “headwinds are likely to persist” immediately after the enterprise decreased its 5G smartphone advice by about 75M models.

“Comps in China are bottoming, but these demand from customers headwinds in typical are likely to persist and there is the probable that in an hard work to stay away from leaving [money] on the desk all over again like it did earlier this yr because of to part shortages, [Apple] sets a high bar for the provide chain and a last shoe could fall late this year,” Arcuri wrote in a be aware to clients.

Arcuri, who also reduced his entire-calendar year 2022 estimates on Qualcomm (QCOM), famous that the organization carries on to diversify away from Apple (NASDAQ:AAPL) and “materially” expanded its organization with Samsung (OTCPK:SSNLF). On Wednesday, Qualcomm (QCOM) prolonged its licensing settlement with Samsung (OTCPK:SSNLF) by way of 2030, and will source the South Korean electronics giant with chips for premium Galaxy handsets, PCs, tablets, prolonged fact units and other electronics.

And while other organizations these types of as automotive and world wide web of things proceed to improve, the firm is still mostly reliant on smartphones, as an believed 70% of earnings is “immediately tied” to modem and chipset revenue and licensing over the up coming number of a long time, Arcuri additional.

Financial institution of The us analyst Tai Liani, who has a buy rating and a $180-a-share price target on Qualcomm’s (QCOM) inventory, also slash fourth-quarter and 2023 estimates, noting that even as high quality handsets are “resilient,” there is even now total weak point, citing the very low to mid-tier.

“The deflating handset demand is a possibility, still we believe it is already mirrored in expectations, and stay self-confident in the company’s extensive-time period income prospects and diversification strategy outside of handsets,” Liani said.

Oppenheimer analyst Rick Schafer famous that the mid-position of Qualcomm’s (QCOM) fourth-quarter assistance arrived in at $11.4B, with earnings for each share of $3.15, or around 5% under Wall Avenue estimates, because of to the aforementioned handset weak point and continued worries more than a weakening world-wide financial state.

Schafer reported that he was nevertheless careful about Qualcomm’s (QCOM) initiatives to diversify more into spots this sort of as automotive and World wide web of Issues technologies, and absent from its potent link to Apple (AAPL).

Qualcomm (QCOM) and several other chip corporations could determine to oppose the $52B CHIPS Act on grounds that the legislation does not do more than enough to assist them and greatly favors manufacturers.