Qualcomm experienced a nearly 6% increase in its stock value on Thursday, primarily driven by robust first-quarter forecasts that suggested an alleviation of the two-year-long decline in the smartphone market, led by a resurgence in China.
As one of the leading chip designers for smartphones, the company’s premarket share price of $117.09 indicated a potential market value increase of nearly $7 billion.
Qualcomm, which endured four consecutive quarters of contraction in its core smartphone sector, is now witnessing signs of a reduction in the inventory surplus within the Android industry. Fresh orders for its chips are contributing to this positive shift in the trend.
The company’s revenue and profit forecasts for the final quarter of the year exceeded the expectations of Wall Street. They anticipate a 35% increase in sales to Chinese smartphone customers compared to the previous quarter.
Canaccord Genuity analysts remarked that while the management anticipates a December quarter with a seasonal uptick that may be less pronounced than usual, the provided guidance was better than anticipated. They also noted improvements in inventory compared to the previous quarter’s expectations.
The company addressed worries about competition from Huawei and Samsung, both of which have transitioned to manufacturing and utilizing their own chips in their devices, a departure from their reliance on Qualcomm in recent years.
CEO Cristiano Amon expressed confidence that Qualcomm will maintain a “majority share” of the chips in Samsung’s upcoming S24 phone series. Additionally, the company doesn’t foresee Huawei’s return to the market having a negative impact on its associations with Chinese smartphone manufacturers.
Stacy Rasgon, an analyst at Bernstein, commented that despite some challenges related to in-house chip usage by Huawei and Samsung, the anticipated market recovery and return to normalcy following the recent downturn might offset these concerns.
According to LSEG data, at least nine analysts upgraded their ratings for Qualcomm’s stock, with the average rating being “buy.” However, the company also faced nine price target reductions due to lingering uncertainties about when the smartphone market’s decline will truly come to an end, which has adjusted Wall Street’s median target to $139.50.
Qualcomm’s shares have seen little change in value this year. They are currently trading at nearly 12 times their estimated earnings for the next 12 months, in contrast to Nvidia, which is highly regarded by investors and trades at a multiple of 27.2.
Reported by Samrhitha Arunasalam in Bengaluru; Edited by Shounak Dasgupta.