The latest earnings report from Qualcomm has fueled pessimism within the semiconductor industry. Analysts on Wall Street have conflicting views on how well the company, known for its mobile processors and 5G wireless chipsets, can weather the storm of a slowdown in smartphone demand.
One particular disappointment for analysts was Qualcomm’s revenue forecast for the fiscal fourth quarter. This has raised questions about the speed of recovery in the handset market and whether Qualcomm can drive growth in other areas.
Despite these concerns, some analysts remain optimistic about Qualcomm’s prospects. The company has been expanding its offerings beyond smartphones and into categories like cars and connected devices.
Susquehanna’s Christopher Rolland wrote, “Overall, while the recovery may be slower to get its legs off the ground given continued softness in handsets, inventories, and the macro, we still believe CEO Cristiano Amon is proving Qualcomm can move beyond a modem and cellular IP company to become a true broad-based semiconductor player.” Rolland has lowered his target price on Qualcomm shares but maintains a Positive rating, as he believes the company’s growth has likely reached its lowest point.
In premarket trading, Qualcomm shares were down 8.6% at $118.22. Prior to the earnings report, the stock had seen an 18% increase this year
Qualcomm Faces Challenges in Smartphone Market
Qualcomm, a prominent player in the smartphone market, is currently facing vulnerabilities due to its reliance on large customers such as Apple. With Apple expected to report a slowdown in iPhone sales, Qualcomm’s business is likely to be impacted. Additionally, the slower-than-expected recovery in China has also affected Qualcomm’s presence in the Android handset market.
While some analysts believe that Qualcomm is not losing market share, they acknowledge that the company is struggling in a challenging handset environment. Piper Sandler analyst Harsh Kumar maintains an Overweight rating on the stock and expects Qualcomm to experience a return to growth in the December quarter. This optimistic prediction is based on anticipated sales from Apple and a stronger seasonal quarter for Android phones.
However, not all analysts share the same confidence in Qualcomm’s diversification strategy. Oppenheimer analysts have kept a Perform rating on the stock without providing a price target. They believe that Qualcomm is overly exposed to the mobile market, which is facing diminishing growth and increasing competition.
These challenges highlight the need for Qualcomm to explore avenues for diversification beyond its heavy reliance on the smartphone market. However, the company may face significant obstacles in this regard.