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Like most technology companies, Qualcomm, Inc. (NASDAQ: QCOM) is benefiting from the digital transformation driven by COVID and the high demand for smartphones so far. The chipmaker’s mixed first-quarter report has fueled speculation about its performance this year, given the pandemic boom and economic uncertainty.
Savings
Qualcomm shares have had a positive start to 2023 and have gained about 25% since the beginning of the year. But it has not fully recovered from the losses suffered last year, due to a decline in smartphone sales – the company’s main source of income. However, the downturn in Qualcomm’s business is cyclical in nature, and in line with the broader semiconductor industry. There will be no significant improvement in the near term, but the company’s financial outlook will be positive, marked by a recovery in the second half.
QUALCOMM Incorporated Q1 2023 Earnings Call Transcript
Although the price is not very cheap, the current share price offers a good entry point. Qualcomm’s dividend has risen steadily over the years, and the stock currently yields 2.2%. While QCOM is expected to make a decent profit this year, it will depend on external conditions like inflationary headwinds and the COVID situation, especially in China.
From Qualcomm’s Q1 2023 earnings call:
“Due to the current macroeconomic environment and demand, we will implement spending reductions and streamline operations without neglecting significant growth and diversification opportunities ahead. This is consistent with our commitment to actively manage operating costs as indicated in the last earnings call. Combined with the actions that have been performed in the quarter, we expect to reduce non-GAAP operating expenses by approximately 5% compared to our run rate exiting fiscal ’22.
Front Street
Qualcomm’s strained relationship with top customer Apple Inc (NASDAQ: AAPL ) has become a major concern after the company began producing its own chips, thereby reducing its reliance on external suppliers. But Qualcomm supplies many leading mobile companies besides Apple and has strengthened its non-smartphone business through continued diversification. In the future, the rapid penetration of 5G technology in mobile phones and other telecommunications systems and the increasing demand for chips in the automotive sector will be one of the main tailwinds for the company.
Earnings: Highlights of Intel’s Q4 2022 financial results
In the first quarter, the CDMA Technologies and Licensing business contracted, causing revenue to fall 12% year over year to $9.5 billion. As a result, adjusted net income fell 27% to $2.37 per share. The top line missed consensus forecasts, while earnings beat expectations. The bottom line had missed the previous quarter, after a streak of more than seven years of beating.
Recovery request
Meanwhile, license revenue increased sequentially. That, along with the year-over-year increase in QCT Automotive and IoT, signal recovery is expected this year. Recently, the company has focused more on non-core areas of the business, but the mobile handset market still accounts for almost two-thirds of its revenues. That means Qualcomm’s sales and margins will remain under pressure until the smartphone market fully recovers.
After steady gains since early January, Qualcomm shares are now trading above their one-year average. The post-earnings momentum continued on Tuesday, and shares traded up 3% in the afternoon.
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