Qualcomm falls 8% on mixed Q3 results and guidance; Deutsche downgrades

Qualcomm reported underwhelming guidance for the current quarter after delivering mixed FQ3 results as revenue fell short of estimates amid a softer smartphone demand.

Qualcomm Incorporated (NASDAQ:QCOM) shares fell more than 8% in pre-market Thursday trade following the report.

The chipmaker reported adjusted EPS of $1.87 on revenue of $8.44 billion. Analysts polled by Investing.com anticipated EPS of $1.81 on revenue of $8.51B.

“We are pleased with our technology leadership, product roadmap and design-win execution, which position us well for growth and diversification in the long term,” said Cristiano Amon, President and CEO of Qualcomm Incorporated.

“As AI use cases proliferate to the edge, on-device AI has the potential to drive an inflection point across all our products. Qualcomm remains best positioned to lead this transition given the unmatched accelerated computing performance with the power efficiency of our platforms.”

For the fiscal fourth quarter, the company guided EPS in the range of $1.80 to $2.00 on revenue of between $8.1B to $8.9B. That compared with Wall Street estimates for EPS of $1.94 on revenue of $8.77B.

“The midpoint of our fourth quarter fiscal 2023 guidance includes the continued impact of the macroeconomic headwinds, weaker global handset units and channel inventory drawdown,” the company said.

Deutsche Bank analysts downgraded the QCOM stock to Hold with a price target lowered by $10 to $120 per share.

“QCOM delivered and in-line qtr and guide vs. our estimates, but management’s soft commentary around its Dec qtr and incremental headwinds in 2024 lead us to reduce our CY24 EPS ests by -8% and downgrade the stock,” the analysts said in a note.

“With QCOM shares trading at its 5yr avg multiple (14x) on our reduced ests that already assume some cyclical rebound and better than the worst case customer scenarios, we see the shares as fairly valued and likely to remain in a $120 +/- trading range until these cyclical and structural uncertainties are resolved.”

CFRA analysts lifted the price target by $2 to $125 per share on the Hold-rated QCOM stock.

“Although we expect QCOM’s under-shipping of true demand is likely to come to an end over the next 3-6 months, we remain wary of QCOM to potentially start losing Apple business by late CY 24,” they wrote.