Qualcomm surges as diversification efforts help results, guidance
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Qualcomm (NASDAQ:QCOM) shares surged more than 8%, Thursday, after the communications technology giant posted better-than-expected second-quarter results and provided guidance that prompted several Wall Street analysts to highlight the company's recent efforts to diversify into new business areas.
Bank of America analyst Tal Liani, who reiterated the firm's buy rating and $220-a-share price target on Qualcomm's (QCOM) stock, noted that all of the company's revenue streams, including handsets and internet of things, saw strong growth. 
"[Qualcomm's] results beat consensus' expectations on all fronts," Liani said, in a research note. Lai said Qualcomm's (QCOM) business showed strength driven by particular strength in semiconductors of handsets and Internet of things [IOT] devices.
For the quarter that ended March 27, Qualcomm (QCOM) earned $3.21 a share, excluding one-time items, on $11.16 billion in revenue, compared to estimates of $2.92 a share in earnings and $10.6 billion in sales. 
Liani also added that Qualcomm's (QCOM) gross and operating margins also beat expectations, due to sales of products used in premium-tier smartphones.
In an interview with Seeking Alpha following the results, Qualcomm (QCOM) Chief Financial Officer Akash Palkhiwala said the company is "more and more becoming a processing company more than a communications company."
Looking ahead, Qualcomm (QCOM) expects to report third-quarter earnings, excluding one-time items, of $2.75 and $2.95 a share and revenue to be between $10.5 billion and $11.3 billion, compared to estimates of $2.59 a share and $9.99 billion in sales.
Raymond James analyst Chris Caso reiterated the firm's buy rating and $222-a-share price target, noting that Qualcomm (QCOM) "silenced the critics" with its report, especially those who were worried about the handset business in China. 
Caso said the main source of Qualcomm's (QCOM) handset strength was share gains from Samsungâs flagship platform. Caso added that Qualcomm (QCOM) expects its handset business this year to grow by more than 50% over 2021, "which coupled with June guidance, implies strong sequential growth in September, which we believe will be driven by new high-end Android launches." 
Deutsche Bank analyst Ross Seymore said that Qualcomm's (QCOM) ability to gain market share and its diversification efforts into areas such as automotive help assuage some business concerns.
Qualcomm (QCOM) is in the process of scaling down the percentage of its business coming from sales of products used in Apple's (AAPL) iPhones. Seymore said that while Qualcomm (QCOM) faces questions about the sustainability of its handset growth over the long term, "we believe the setup for continued growth for the [second-half of the year] remains strong."
Prior to Qualcomm's (QCOM) earnings release, Daiwa analyst Louis Miscioscia placed the company on his top picks list due to the "number of growth drivers" beyond the 5G market.