Qualcomm takes a hit as chipmaker sees more handset weakness ahead
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Qualcomm (NASDAQ:QCOM) shares pares some of their losses, but remained down by almost 7% in after-hours trading Wednesday as the communications chipmaking giant said its handset business is likely to see a greater-than-expected decline for the rest of the year.
Chief Executive Cristiano Amon echoed some of what many other tech kingpins have recently said about the effects of supply chain issues and a build up of products in their business pipelines. In a statement, Amon said Qualcomm's (QCOM) "financial outlook is being temporarily impacted by elevated channel inventory," but that the company's diversification strategy and "long-term opportunities remain unchanged."
Amon's comments came along with Qualcomm (QCOM) saying that it now expects its handset volume business to decline in "a low double-digit percentage range" for 2022, as opposed to an earlier forecast of a "mid single-digit percentage decline" from a year ago. Qualcomm (QCOM) said that it was modifying its handset outlook due to "the rapid deterioration in demand and easing of supply constraints across the semiconductor industry [that] have resulted in elevated channel inventory."
Along those lines, Qualcomm (QCOM) said it now expects to earn between $2.25 and $2.45 a share, excluding one-time items, on revenue of $9.2B to $10B for its current, fiscal first quarter.
Qualcomm (QCOM) also said that for its fiscal fourth quarter, which ended September 25, it earned $3.13 a share, excluding one-time items, on revenue of $11.39B. Wall Street analysts had earlier forecast Qualcomm (QCOM) to earn $3.13 a share, on $11.36B in sales for the quarter.
The company has been taking steps to reduce its reliance upon smartphones and expand into other growth areas such as the automotive industry. During its fourth quarter, Qualcomm's (QCOM) automotive revenue climbed by 58% from a year ago, to $427M.
However, automotive remains a nascent business for Qualcomm (QCOM), and, for now, contributes the smallest amount among all of the company's main product groups to the company's total sales. Handsets remain Qualcomm's (QCOM) biggest source of revenue, and rose 40% from a year ago, to $6.6B in the company's fourth quarter.
As a sign of how handsets still matter to Qualcomm (QCOM), the company said it expects to have "the vast majority of share" of 5G modems in the next version of Apple's (AAPL) iPhone in 2023.
Internet of Things sales rose to $1.92B, up 24% from last year, and RF front-end sales of $992M were down 20% from a year ago.
Last week, Qualcomm (QCOM) received strong enthusiasm from HSBC analyst Frank Lee, who started his coverage of Qualcomm (QCOM) with a buy rating.