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Qualcomm Inc.’s optimism about the coming rollout of 5G products amid the COVID-19 pandemic was enough to lift the stock’s performance Thursday above its peers as analysts weighed the merits of the chip maker’s earnings results and outlook from late Wednesday.
Late Wednesday, Qualcomm QCOM, -0.63% topped Wall Street estimates for the quarter and stuck to its 5G handset forecast for the year while reducing its earnings forecast due to the COVID-19 pandemic.
Qualcomm expects a hit of 30 cents a share to its adjusted third-quarter earnings, forecasting 60 cents to 80 cents a share. As a result, analysts surveyed by FactSet lowered their estimates to 74 cents a share from a previous 78 cents a share.
Shares of Qualcomm, which hit an intraday high of $80.87 for a 2.4% gain, were last off 0.2% at $78.85. For most of Thursday’s session, the stock was the sole gainer on the PHLX Semiconductor Index SOX, -3.50%, which was down nearly 3% Thursday. In comparison, the S&P 500 SPX, -1.34% was off 1.1% and the tech-heavy Nasdaq Composite Index COMP, -0.87% was down 0.6%.
Of the 29 analysts who cover Qualcomm, 16 have buy or overweight ratings, 11 have hold ratings, and two have sell ratings. Of those, seven reduced their price targets, while four raised theirs, resulting in an average price target of $93.60, up from a previous $92.26, according to FactSet.
While the unchanged 5G forecast is a positive, Qualcomm’s forecast of a 30% drop in total handsets was “most disappointing,” said Susquehanna Financial analyst Christopher Rolland, who has a positive rating and a $95 price target on Qualcomm. On the whole, Rolland said the outlook was “reasonable” given the “dreadful state of the global handset market.”
“Stepping back, we deem this report as constructive as 5G expectations remain unchanged, along with the promised content gains,” Rolland said.
Cowen analyst Matthew Ramsay, who has an outperform rating and a $100 price target, said the earnings report showed that “factors within Qualcomm’s control were near universally positive.”
“Variance in these unit estimates has grown as the macro backdrop has been impacted by COVID-19, with new questions on consumer spending levels and whether enhanced data rates of 5G will be enough for consumers to bear higher still device costs,” Ramsay said. “On the flip side, we believe carriers are heavily incentivized to drive contract upgrades, with Apple and Huawei (who remains in a dispute with Qualcomm) both launching high profile 5G products.”
“Fundamentally, however, we see Qualcomm holding the premier modem technology to an industry on the cusp of its first major upgrade cycle in nearly a decade,” Ramsey said.
Mizuho analyst Vijay Rakesh, who has a buy rating and a $91 price target, considered the report “better than feared,” but noted that Apple Inc. AAPL, +1.23% earnings, which drop after the bell Thursday, will be key in gauging 5G launch schedules.
