Qualcomm (QCOM) Shares Rally 14% on Sales and Earnings Beat, Several Firms Boost Numbers
Shares of Qualcomm (NASDAQ: QCOM) erupted 14% in pre-open trading Thursday after the company reported higher-than-expected sales and earnings numbers for the third quarter. The strong results and 5G opportunity led many Wall Street firms to raise estimates and price targets.
QCOM posted EPS of $1.45 per share on an adjusted basis to top Street’s expectations of $1.17. Revenue came in at $6.5 billion vs $5.93 billion estimated. Net income soared 76% compared to a year ago.
“Fiscal 2020 was an extraordinary year, presenting both a unique set of opportunities as well as challenges. We achieved a number of significant accomplishments, including scaling 5G devices globally with our partners while navigating the sudden onset of the global pandemic,” said Steve Mollenkopf during a call with investors.
As for the fourth quarter, QCOM forecast revenue to come between $7.8 billion and $8.6 billion, and adjusted EPS between $1.95 and $2.15.
In the future, Qualcomm will change its reporting and offer revenue generation figures from handset, radio frequency, automotive and internet-of-things chips.
Following QCOM’s earnings report, Morgan Stanley analyst Joseph Moore said the company delivered “an exceptionally strong quarter”. He reiterated an “Overweight” rating and raised the price target from $121.00 per share to $159.00.
“Qualcomm reported an exceptionally strong quarter, with 2h revenues about 15% above our estimate as volumes are less weak - but still realistic - and content is growing. New segmentation adds transparency, as we had hoped,” Moore said in a note on Thursday.
“As semiconductor growth stories are being rerated, this should have even more rerating potential as we are moving from a value story to a growth story. The legal drama of the last 2-3years should be clearly behind us, with every handset manufacturer globally signed on as a licensee for 5G,and the FTC risks materially diminished as Qualcomm won its appeal.
“Chipset market share should also rise next year, with a much more limited competitive set around 5G, and significant rise in dollar content as we have 150% or so growth in 5G volumes.
While there will be 5G competition from internal chip divisions of Apple and Samsung down the road, we don’t expect to see that until CY22, so market share will be a substantial tailwind as 4G volumes start to decline.”
Mizuho managing director Vijay Rakesh reiterated a “Buy” rating on QCOM and raise the price target to $154.00 per share from prior $145.00 as the firm “drives a global multi-year 5G transition ahead with Snapdragon leadership, RF, Automotive telematics and a QTL licensing rebound, with all major handset OEMs licensed.”
“We believe QCOM is driving a five- to six-year 5G transition with mmWave, with multi-year licensing agreements with all major global handset OEMs,” said Rakesh in a note to clients after raising estimates for the fourth-quarter revenue/EPS and F22E.