Qualcomm inventory falters after earnings. How do analysts see the possibilities of a restoration?

font dimension

Qualcomm

It added to pessimism in regards to the semiconductor business with its fiscal third-quarter earnings report. Wall Road analysts are divided on how properly the specialist in cell processors and 5G wi-fi chips will fare within the face of a slowdown in smartphone demand.

Qualcomm

(Inventory ticker: QCOM) was disillusioned with its fiscal fourth-quarter income forecast. The questions for analysts now are how rapidly the telephone market will recuperate and whether or not Qualcomm can increase progress in different areas.

Qualcomm shares had been buying and selling down 10%, at $116, in early buying and selling. The inventory is up 18% this 12 months forward of its earnings report on Wednesday.

Analysts at Deutsche Financial institution stated the report raised deeper questions in regards to the telephone market’s restoration and whether or not it was greater than a cyclical slowdown. They downgraded Qualcomm inventory to Maintain from Purchase and worth goal to $120, from $130.

“The interval of headwinds that QCOM continues to face in its {hardware} sector is resulting in a rise in structural reasonably than simply cyclical questions (resembling mixes, pricing, post-5G cooldown, and so forth.),” ​​Ross Seymour of Deutsche Financial institution wrote in a analysis word. )”.

Seymour famous that Qualcomm is already buying and selling at about 14 occasions its anticipated earnings per share, consistent with its five-year common a number of, and stated there’s little purpose to count on enchancment proper now.

Some had been extra optimistic about Qualcomm, which is increasing into classes like vehicles and linked gadgets.

“Total, whereas the restoration could also be slower to get its legs off the bottom given the continued softness in cell, shares and macros, we nonetheless imagine that CEO (Cristiano) Amon proves that Qualcomm can transfer past the modem and mobile IP firm to change into a broad-based semiconductor participant. Christopher Rowland wrote from Susquehanna.

Rolland minimize his worth goal for Qualcomm shares to $140 from $145 however maintained a constructive ranking for the inventory, indicating that its progress might have bottomed out.

A part of Qualcomm’s weak point is its present reliance on main prospects within the smartphone market resembling

apple

(AAPL), which is anticipated to report slowing iPhone gross sales in its earnings report on Thursday. A slower-than-expected restoration in China seems to have harm Qualcomm’s enterprise within the Android market.

“We’re assured that QCOM doesn’t seem like dropping share, however reasonably caught in a troublesome telephone surroundings,” analyst Piper Sandler Harsh Kumar wrote in a analysis word, echoing the inventory’s obese ranking.

Kumar is wanting ahead to Qualcomm displaying a return to progress within the December quarter, helped by Apple’s gross sales and a stronger seasonal quarter for Android telephones.

Analysts at Oppenheimer Firm preserve a efficiency ranking on the inventory with out specifying a worth goal.

“We imagine the corporate is overexposed to the cell market, with its diminishing progress and rising competitors,” Rick Schafer Oppenheimer wrote.

Write to Adam Clark at adam.clark@barrons.com