Weak Guidance Prompts Downgrade: Qualcomm Rating Lowered to Buy by Daiwa Capital

Daiwa Capital's Louis Miscioscia downgraded their rating on Qualcomm (NASDAQ: QCOM) from Strong Buy to Buy on 2023/08/09. The analyst also announced a $125 price target.

Post Qualcomm's Q3 2023 earnings report, released on 2023/08/02, Miscioscia pointed to management's "more muted guidance" as the reason for their downgrade.

Management cited several factors for their guidance cut, including no signs of improvement in the Chinese economy, low overall consumer demand, high inventories, and Apple's increased purchases earlier in the year. Despite these near-term headwinds, Miscioscia assured readers that Daiwa Capital still sees Qualcomm as a "long-term growth potential story."

In their Q3 2023 report, Qualcomm reported earnings per share (EPS) of $1.87, beating the Zacks Consensus Estimate of $1.81 but missing last year's Q3 figure of $2.96 by 36.8%. Total revenue for the quarter stood at $8.45 billion, which fell short of the Zacks Consensus Estimate of $8.51 billion and last year's Q3 revenue of $10.94 billion by 22.8%.

The QTL (Qualcomm Technology Licensing) revenue for Q3 2023 was $1.23 billion, down 19% year-over-year, while QCT (Qualcomm CDMA Technologies) revenue was $7.174 billion, down 24% year-over-year.

Looking ahead to Q4 2023, Qualcomm's management provided guidance for total revenue ranging from $8.1 billion to $8.9 billion. They also projected revenue from QTL to be between $1.15 billion and $1.35 billion, and revenue from QCT to be between $6.9 billion and $7.5 billion. The company expects EPS for the quarter to be in the range of $1.80 to $2.00.

President and CEO Cristiano Amon expressed satisfaction with Qualcomm's technology leadership, product roadmap, and design-win execution, which position the company well for long-term growth and diversification. Amon emphasized the potential of on-device AI to drive an inflection point across all Qualcomm products, stating that the company remains best positioned to lead this transition with its unmatched accelerated computing performance and power efficiency.

According to the latest analyst ratings, 85.7% of top-rated analysts currently rate Qualcomm as a Strong Buy or Buy, while 14.3% see it as a Hold. Notably, no analysts recommend or strongly recommend selling the stock.

Since Qualcomm's latest quarterly report on 2023/08/02, the stock price has experienced a 9% decline. Year-over-year, the stock is down 20.4%. During this period, Qualcomm has been trailing the S&P 500, which has declined by 7.9%.

Daiwa Capital analyst Louis Miscioscia is ranked by WallStreetZen in the top 26% out of 4,293 Wall Street analysts, with an average return of 10.8% and a 46.2% win rate. Miscioscia specializes in the Consumer Cyclical and Technology sectors.

Qualcomm Incorporated, founded in 1985 and headquartered in San Diego, California, is engaged in the development and commercialization of foundational technologies for the wireless industry worldwide. The company operates through three segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies for wireless voice and data communications, networking, application processing, multimedia, and global positioning system products. The QTL segment grants licenses or provides rights to use portions of its intellectual property portfolio, which include various patent rights useful in the manufacture and sale of wireless products. The QSI segment invests in early-stage companies and provides development and other services to the United States government agencies and their contractors.

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