Mobile device chipmaker Qualcomm handily beat Wall Street's targets for its fiscal first quarter and guided slightly above views for the current period. But QCOM stock fell Thursday over concerns about the strength of the smartphone sales recovery.
The San Diego-based company late Wednesday said it earned an adjusted $2.75 a share on sales of $9.92 billion in the quarter ended Dec. 24. Analysts polled by FactSet had expected Qualcomm earnings of $2.37 a share on sales of $9.51 billion. On a year-over-year basis, Qualcomm earnings increased 16% while sales climbed 5%.
Qualcomm's Q1 report marked a return to growth after four straight quarters of declining sales and earnings on a year-over-year basis. A downturn in smartphone sales hurt Qualcomm's performance last fiscal year.
For the current quarter, Qualcomm predicted adjusted earnings of $2.30 a share on sales of $9.3 billion. That's based on the midpoint of its guidance. Analysts had been looking for earnings of $2.25 a share on sales of $9.28 billion in the March quarter. In the year-earlier period, Qualcomm earned an adjusted $2.15 a share on sales of $9.27 billion.
Qualcomm Announces Contract Extensions
"Looking ahead, we are building on this momentum with our leading Snapdragon platforms and technology differentiation in connectivity, computing and on-device generative AI, across handsets, automotive, PC, XR (extended reality) and industrial IoT (Internet of Things)," Chief Executive Cristiano Amon said in a news release.
Qualcomm also announced extended technology licensing agreements with Apple and two Chinese handset makers. Plus, Qualcomm revealed an extension of its chip supply agreement with Samsung.
QCOM Stock Falls After Earnings News
On the stock market today, QCOM stock fell 5% to close at 141.11. Earlier in the session, it dropped as much as 5.7% to 140.09. But shares bounced off their 50-day moving average line.
In the December quarter, Qualcomm's handset chip sales rose 16% to $6.69 billion. Automotive chip sales increased 31% to $598 million. But Internet of Things chip sales declined 32% to $1.14 billion.
Citi analyst Christopher Danely downgraded QCOM stock to neutral from buy. In a client note, he predicted "more instances of downside as the year progresses" for Qualcomm.
JPMorgan analyst Samik Chatterjee lowered his price target on QCOM stock to 170 from 173 but kept his overweight rating.
In a report, Chatterjee called the current smartphone recovery "modest." Also, Qualcomm's results and outlook likely benefited from inventory restocking ahead of product launches by Android handset vendors, he said.
Qorvo, Skyworks Diverge After Reports
Elsewhere among semiconductor stocks, wireless-chip makers Qorvo and Skyworks Solutions also reported December-quarter results late Wednesday.
On Thursday, Qorvo stock rose 6% to close at 105.75. Meanwhile, Skyworks stock sank 1.4% to 102.96.
Qorvo beat analyst estimates for its fiscal third quarter and with its guidance for the current period.
Skyworks edged above analyst estimates for earnings on in-line sales in its fiscal first quarter. But it guided above views for sales in the March quarter.
Apple iPhone Sales Could Fall 15% In 2024
Apple is the largest customer for both Qorvo and Skyworks. The iPhone maker accounts for about 37% of sales at Qorvo and 73% at Skyworks.
Earlier this week, TF International Securities analyst Ming-Chi Kuo predicted that Apple iPhone sales could see a "significant decline" in 2024. Apple's orders of key semiconductor components point to iPhone shipments of about 200 million units this year, down 15% from 2023, he said.
Apple's iPhone sales will be hurt by the resurgence of Huawei in the Chinese market, the growing popularity of foldable phones, and Samsung's new AI-enabled Galaxy S24 handsets, he said.
QCOM Stock Ranks Sixth In Group
Qorvo and Skyworks are tied for 12th place out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. Both have an IBD Composite Rating of 50 out of 99.
Meanwhile, Qualcomm ranks sixth out of 38 stocks in IBD's fabless semiconductor industry group, IBD Stock Checkup says. QCOM stock has an IBD Composite Rating of 94.
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