Qualcomm posts strong results, but not enough to 'sway the debate,' UBS says
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Qualcomm (NASDAQ:QCOM) posted strong first-quarter results and gave guidance that was "well above even the most optimistic expectations," UBS said in a research note, however it may not be enough to "sway the debate" as investors look ahead to smartphone chip sales and the company's position in China. 
Analyst Timothy Arcuri kept his neutral rating and $185 price target following the results. He explained that there is likely to be a "muted stock reaction in the near term" as investors key on the June quarter, "which should see a worse than seasonal decline for the core chipset business," despite positive results from its other areas, including automotive and Internet of Things.
"Net, our F22 estimates head a touch higher and although we see QCOM well positioned to exceed its 20%+ EPS growth target in 2022 this is likely reflected in [Wall Street] estimates," Arcuri wrote in the note, adding that he still finds it " hard to get excited about the stock at present levels in the absence of structural growth driver to materially drive a re-rating."
For the period ending December 26, Qualcomm said it earned $3.23 per share on $10.7 billion in revenue, up 30% year-over-year. A consensus of Wall Street analysts expected Qualcomm to earn $3 per share on $10.43 billion in revenue during the period.
For the second quarter, Qualcomm said it expects to generate between $10.2 billion and $11 billion in revenue, with earnings coming in between $2.80 and $3 per share. Analysts expected the company to earn $2.48 per share on $9.54 billion in revenue.
Despite the earnings beat and guidance boost, Qualcomm (QCOM) shares fell in pre-market trading on Thursday, down nearly 2.5% to $183.55.
Arcuri raised his earnings and revenue estimates for the second quarter, as he now expects the San Diego-based Qualcomm to earn $2.89 per share on $10.6 billion in revenue, up from $2.32 per share and $9.66 billion in sales.
The analyst added that looking at the rest of the year, that the average selling price for Qualcomm's modem chip is likely to be a headwind for the chipset business, especially as Android mix moves to mid-lower tier and modem revenues decline 20% sequentially in the June quarter.
"Adjacencies+RFFE growth should accelerate in FH2:22 as supply incrementally comes online, but to us RFFE is still heavily keyed to smartphones and Autos remains too small to materially move the needle in the near term, meaning ultimately FH2 still remains largely driven by the trajectory of the core chipset business."
Last month, Qualcomm (QCOM) was picked by Goldman Sachs as one of the top stock picks for tightening financial conditions, due to its strong free cash flow, high margins and rock-solid balance sheet.