Qualcomm stumbles as analysts question guidance, 'structural uncertainties'
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Qualcomm (NASDAQ:QCOM) shares tumbled more than 8% in pre-market trading on Thursday after the semiconductor company reported mixed third-quarter results with weak guidance, resulting in some harsh commentary from Wall Street.
Deutsche Bank analyst Ross Seymore downgraded Qualcomm (QCOM) shares to hold from buy and cut his price target to $120 from $130, noting that the "soft commentary" from management around the upcoming quarter and incremental headwinds for next year may be a question of structural issues with the company.
"While we continue to believe the cyclical snapback is a matter of when not if (and build in such a rebound in IoT, Auto and QTL), the duration of the headwinds QCOM continues to face in its Handset segment is leading to rising structural rather than just cyclical questions (i.e. mix, pricing, post-5G lull, etc.)," Seymore wrote in an investor note. 
Seymore added that "confidence in the [company's] growth potential will remain challenged," citing the fact that Apple (AAPL) and now Huawei may replace Qualcomm (QCOM) in their respective smartphones with in-house modems.
In March, Qualcomm (QCOM) CEO Cristian Amon said the company had "no plans" to provide Apple (AAPL) with modem chips in 2024. 
Wells Fargo analyst Gary Mobley, who has an underweight rating on Qualcomm (QCOM) and a $95 price target, also struggled to find highlights, citing continued inventory drawdowns as the smartphone market re-calibrates to lower demand due to longer replacement periods. 
"We view QCOM as a relative underperformer in a risk-on market, one of the drivers for our downgrade of QCOM in late [20222]," Mobley wrote. "QCOM continues to see the impact of inventory drawdowns in the global handset [market] as well as the IoT [market], w/o enough offset from cont'd strength in automotive." 
For the period ending June 25, Qualcomm (QCOM) earned an adjusted $1.87 per share on $8.44B in revenue. QCT revenue declined 24% year-over-year to $7.17B, while revenue related to the QTL segment declined 19% year-over-year to $1.23B.
Wall Street analysts expected Qualcomm (QCOM) to earn $1.81 per share, while sales were forecast to drop nearly 22% year-over-year to $8.51B.
Looking ahead, Qualcomm (QCOM) expects fourth-quarter adjusted earnings to be between $1.80 and $2 per share, with revenue between $8.1B and $8.9B. Both metrics are below Wall Street's forecasts of $1.94 per share and $8.79B, respectively. 
Analysts are largely bullish on Qualcomm (QCOM). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates QCOM a HOLD.
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