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Qualcomm rallies on signs smartphone market slump is easing

Qualcomm
Photo: Qualcomm

Thursday saw a roughly 6% increase in Qualcomm (QCOM.O) as the company’s robust first-quarter estimates suggested that the two-year decline in the smartphone industry was waning, driven mainly by a rebound in China.

Based on its $117.09 share price, the company—one of the most prominent designers of semiconductors used in smartphones—was expected to see an almost $7 billion boost in its market worth.

With new orders for its processors, Qualcomm is beginning to see an end to the inventory build-up in the Android industry, following four quarters of decrease in its core smartphone sector.

The business forecasted a 35% quarterly increase in sales to Chinese smartphone consumers, exceeding Wall Street predictions for both revenue and earnings in the last three months of the year.

“While management … still anticipate a less-than-normal seasonal uptick in December quarter, the guidance was better than anticipated with signs of inventory improving ahead of last quarter’s expectations,” analysts at Canaccord Genuity stated.

The business also allayed worries regarding rivalry from Samsung (005930. KS) and Huawei (HWT.UL), which have depended on the American corporation for several years and are now creating and utilizing their chips in products.

According to Qualcomm CEO Cristiano Amon, the company does not anticipate Huawei’s re-entry into the market harming its relationships with Chinese smartphone manufacturers. Qualcomm intends to keep a “majority share” of the processors in Samsung’s S24 range of phones.

“While some narrative headwinds (the use of in-house chips at Huawei and Samsung) still exist, we may find the market recovery or normalization off that trough may offset those eventualities,” said Stacy Rasgon, Bernstein analyst.

Based on LSEG data, at least nine analysts upgraded their recommendations for Qualcomm’s shares with an average “buy” rating. However, the business has also seen nine reductions in price targets due to persistent concerns about the actual end date of the smartphone collapse, which raised Wall Street’s median estimate to $139.50.

This year has seen little change in the company’s shares. They are trading at over 12 times their projected 12-month earnings, while Nvidia, the darling of investors, is trading at 27.2.

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