Qualcomm Q4 preview: Where next for the Qualcomm share price?
Joshua Warner November 1, 2021 9:58 AM
How has Qualcomm performed as demand continues to outstrip supply amid the scramble for chips and components? We explain what to expect and consider how Qualcomm shares could react this week.
When will Qualcomm release Q4 earnings?
Qualcomm is scheduled to publish fourth quarter and full year earnings after US markets close on Wednesday November 3.
Qualcomm Q4 earnings preview: what to expect from the results
Qualcomm is expected to post another strong quarter of results this week amid the global scramble for chips by companies around the world. Management said in its last update that demand is expected to continue to outstrip supply across all of its businesses, but that capacity would see a ‘material improvement’ by the end of 2021, which should allow it to capture more demand in a tight market.
Qualcomm has said it is aiming to deliver fourth quarter revenue of $8.4 billion to $9.2 billion and non-GAAP diluted EPS of $2.15 to $2.35. Wall Street forecasts revenue of $8.86 billion and EPS of $2.26. That would compare to the $6.50 billion and EPS of $1.45 delivered in the fourth quarter of its last financial year.
Importantly, Qualcomm has beaten analyst EPS forecasts for at least eight consecutive quarters while its topline has come in better than expected in seven out of the last eight set of quarterly results, according to data from Bloomberg.
Qualcomm’s largest business is supplying chips used in smartphones and the offtake of 5G has provided significant momentum. For example, Qualcomm is aiming to deliver high single digit growth in handset shipments across 3G, 4G and 5G over the full year. However, this is primarily being driven by 5G, with shipments expected to come in between 450 to 550 million units compared to just 240 million last year. Most of that growth is coming from supplying Snapdragon chips to higher-end Android smartphones, although the biggest challenge will be meeting demand while facing supply chain bottlenecks.
Its RF front-end segment, which saw revenue more than double year-on-year in the previous quarter to make it the fastest-growing part of the business, should continue to perform well although there are growing doubts whether momentum can be maintained next year amid intense competition from the likes of Mediatek and Samsung and limited expansion in radio-frequency content from Apple since it launched the iPhone 13.
The rapid adoption of 5G should also bode well for its second largest unit covering the Internet-of-Things (IoT), which refers to the array of connected devices entering the market from wearable tech to smart home products. Meanwhile, its fast-growing business supplying chips to the automotive industry should benefit from sky-high demand for cars and the ever-growing connectivity of the new vehicles entering the market. It is worth noting that Qualcomm struck a deal to buy Veoneer to help bolster its position within the driver assistance market during the quarter.
Together – handsets, RF front-end, IoT and automotive – represent Qualcomm’s QCT division, which is quickly expanding and diversifying the business. Qualcomm has said the QCT division should deliver fourth quarter revenue of between $7.0 billion to $7.5 billion. That would be up from $6.47 billion in the third quarter and a significant improvement from the $4.96 billion delivered in the fourth quarter of last year.
Its other main division QLT, which is responsible for Qualcomm’s licensing activity, should deliver fourth quarter revenue of between $1.45 billion to $1.65 billion. That would compare to the $1.48 billion delivered in the last quarter and the $1.50 billion booked in the fourth quarter of last year.
If Qualcomm meets analyst expectations in the final three months of its financial year, then that should lead to overall annual revenue of $33.01 billion and EPS of $8.26. That would mark a significant improvement from the $21.65 billion in revenue and $4.19 EPS booked in the previous year.
Qualcomm shares have rallied over 48% since the start of the pandemic but has shed over 18% since hitting fresh all-time highs of $162.42 back in January. Still, the 35 brokers covering the stock remain extremely bullish on Qualcomm’s prospects with an average Buy rating and a target price of $178.72, implying there is over 33.5% potential upside and that shares can climb to new all-time highs going forward.
Where next for the Qualcomm share price?
Qualcomm share price had been forming a series of lower lows and lower highs since early August. The share price found a floor at $122 the yearly low before rebounding.
More recently Qualcomm’s recovery from the yearly low has stalled around $133 consolidating after a firm move higher. The MACD is supportive of further upside.
A break above $133 is needed in order to expose the 50 sma at $135 and the 100 sma at $139. Above here buyers could gain traction.
Meanwhile the downside has been capped over the past week by $130. A break below this level could bring $122 back into target.
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